Skip to content

“Cash Balance Options” wrong for OK public employees

March 13, 2014

From Duncan Banner, March 5, 2014
The public employees in Oklahoma have the same problems that the United States Military has – politicians who say, “I was not in office for that part of the deal” – while attempting to erode the benefits previously promised. In the case of Oklahoma’s public employees it is their retirement programs. Oklahoma’s legislators tired argument is always the same. Public employees will work forever with no increase in salary and gladly pay into a 401-k plan that benefits Wall Street money miss-managers. A study released in Economic Policy Institute (EPI) in conjunction with the Keystone Research Center (KRC) documents that fees charged by Wall Street firms and lower returns when employees make their own investment, will end up costing Oklahoma taxpayers substantially more for the same benefits.
A plan labeled “Cash Balance Option” preferred by the PEW and Arnold Foundation, has the capability of providing lower investment returns at higher costs and less security at retirement for employees due to high maintenance fees charged by plan managers.
As shown by keepokpromises.org, “Oklahoma public pensions are already among the most modest in the nation and public employees – such as teachers – earn less than private Oklahoma workers and teachers in other states. Average pension benefits in Oklahoma’s two biggest plans – for teachers and state workers – are below $20,000. In addition, average pay for Oklahoma K-12 ranks 48th in the nation, 20% below the national average for public school teachers and likely more than 25% below college educated workers in the Oklahoma private sector, Additional cuts to pensions for career workers – as a result of a cash balance, 401(k) -type, or hybrid pension – could trigger turnover rates that undermine the quality of schools and other services while requiring offsetting wage increases to restore stability to public employers.”
` Further, keepokpromises.org reports, A consolidated governing board would centralize a vast amount of power in governor’s office. Our latest information is that all of the new board members will be political appointees, with the governor appointing a majority. This will greatly politicize the pension system, with high-powered political appointees and donors vying for the opportunity to manage over $22 billion in assets.
Proponents of pension reform will tell you they are doing it because our system isn’t adequately funded. That is not the case. Yes, a few of the Oklahoma pensions and retirement systems need to be better funded. But in the past few years the Legislature has made several changes to the systems, and these changes are working. Experts say that all systems will be sufficiently funded in about 22 years, which is a safe period in terms of pension systems.”
The Oklahoma policy Institute, of Tulsa, OK explains, “As of 2013, Oklahoma Public Employees Retirement System (OPERS) has an 81.6% funded ratio on an actuarial basis and ending 87.6% market value funded ratio. This is above the standard 80% benchmark for well-funded plans. The unfunded liability of 1.6 billion represents less than 15% of the state’s total unfunded pension liability referred to by the governor.
There has been no comprehensive actuarial study conducted of the proposals now moving through the Legislature, and no such study is anticipated.
Approving a fundamental change in Oklahoma’s retirement benefits without the benefit of a thorough actuarial study on the impact the change would have on the system’s financial security – as well as on employees retirement security and the state’s ability to recruit and retain high quality workforce- certainly indicates a serious failure of due diligence on the part of Oklahoma’s legislature.

Advertisements

From → Uncategorized

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: