Skip to main content
Resolutions & Amendments

37th International Convention - Chicago, IL (2006)

Preserving Public Pension Plans

Resolution No. 37
37th International Convention
August 7-11, 2006
Chicago, IL

All workers want to retire in dignity, with a reliable income that enables them to maintain their standard of living and not fall into poverty in old age; and

Social Security provides a modest retirement income for most Americans, but it was never meant to be more than an income floor that would be complemented by an employer-sponsored pension and personal savings; and

Most AFSCME members can expect to receive an employer-sponsored pension when they retire – a traditional “defined benefit” (DB) plan that is based on wages and years of service, that guarantees the vested worker monthly benefits for life, includes options to extend benefits to the worker’s spouse or survivor, and to which both the worker and employer contribute; and

These plans are professionally managed in order to get maximum return on investment, are highly diversified – with investments in everything from stocks and bonds to real estate – in order to balance gains and losses, and place all financial risk on the employer rather than on workers and retirees; and

Conservative legislators and organizations are waging a campaign across the country to reduce the responsibility of state and local governments for their employees’ retirement security; and

Their goal is to eliminate DB plans and replace them with defined contribution (DC) plans –essentially individual retirement savings accounts that shift the risk of financial losses from the employer to the workers and retirees; and
These forces have already succeeded in converting Alaska’s DB plan to a DC plan – even though Alaska public employees don’t participate in Social Security and have relied on their pension plan as their only safety net; and

AFSCME and other public pension advocates were able to mobilize members and fight off recent efforts to eliminate DB plans in Colorado and California, but similar threats to DB plans are looming in Michigan, Minnesota, New Jersey, Montana and other states; and

DC plans offer much less security to workers: individual accounts do not provide a known benefit because they are subject to market fluctuations; accounts must pay steep management fees that come directly from account assets; account proceeds cannot be supplemented by post-retirement cost-of-living adjustments; and market downturns may require older workers to keep working longer if account balances show big losses; and

DC proponents are not being honest with taxpayers when they claim DC plans will cost them less, because most funding for public-sector DB plans comes from employee contributions and investment returns, with only 26 percent coming from the sponsoring jurisdiction. Merrill Lynch concludes that a well-managed DB plan usually costs employers less in the long run; and

Claims that DB plans are severely under-funded are also untrue, with asset growth outpacing growth in liabilities for most plans.  DB plans that do show a large unfunded liability are generally in that predicament because the sponsoring government failed to fund them consistently and not because workers failed to make contributions; and

Public employees have shown their preference for their DB plans by overwhelmingly rejecting DC accounts where a choice is available – in such states as Florida, Michigan and Ohio.

That AFSCME do everything possible to defeat efforts to replace reliable defined benefit pension plans with risky defined contribution plans; and
That AFSCME will work with other public employee unions and support state-based campaigns to inform taxpayers that there is value in providing dependable benefits for public employees, that public employers can set an example for private employers by doing so, and that all workers stand to gain by sticking together and defending our right to a decent retirement.
SUBMITTED BY: Alice Goff, President and Delegate
Sylvena Parker, Secretary and Delegate
AFSCME Council 36