Unions strongly resist move to 401(k)



August 24, 2011 - 12:00 AM

As the Kansas Legislature struggles to find a solution to the $8.3 billion hole in the Kansas Public Employee Retirement System (KPERS) fund, school teachers, police and other government workers are being “painted in a negative light,” according to the Coalition for Keeping the Kansas Promise.
A special legislative study commission is working to fix the KPERS budget shortfall, a budget problem caused by the Legislature’s failure to fund the KPERS reserve sufficiently for the past 17 years. The group is devising a plan which could include switching  from the existing defined benefit plan, also known as pensions, to a defined contribution plan mirroring the 401(k) plans often seen in the private sector.
About 10 government-worker unions across the state make up the Coalition for Keeping the Kansas Promise (CKKP) whose goal is to explain why supporting a 401(k) plan may result in less money for retirees.
Jane Carter, a CKKP spokeswoman, and other members of CKKP were in Iola Aug. 17 to explain their position.
First on their list is the misconception that public retirees receive a “golden parachute” of benefits that carry them securely through their retirement years.
Carter, executive director for the Kansas Organization of State Employees, also accused the Kansas Policy Institute, a think tank based in Wichita and a voice in the ongoing KPERS negotiation, of giving misleading and often times flat-out untrue statistics regarding public employee retirement plans.
“They base their studies on information that isn’t always accurate,” Carter said. “They also attack government workers — the teachers, the police and firefighters.”
Carter said the $1,100 average monthly income of retired state workers is a far cry from what KPI is having the public believe.
“They make it sound like we have pension plans that are golden parachutes, where we have teachers who are making $70,000 a year in retirement,” she said. “ But if you look at the surrounding areas, sadly, Oklahoma and Missouri are even better than we are when it comes to the benefits government retirees get.”
 KPI President Dave Trabert denied any intent to portray 
current or retired government workers negatively.
“All we are doing is reporting the facts,” he said. “The reason that we are doing these analyses is so that people have all the facts.”
Trabert agreed the average pension for government employees is only $1,100 but said that figure isn’t relevant to the KPERS discussion. To find the average, CKKP took the total pension payouts and divided that number by the number of pension recipients.
“Most of the recipients are people who worked for the government only for a very short period of time. They weren’t career employees. If somebody works (for the government) four or five years and retires, they get a very small pension, that’s figured into that average,” Trabert said. “That’s not the way to calculate the retirement benefit a plan is designed to create.”
To further his point, Trabert said a government employee who retires with an average salary of $50,000 after 35 years of service receives a $30,650 annual pension.
“Between pension and Social Security, you’re at about $47,000 per year,” he said. “But you actually get more because government pensions are not subject to state income tax.”
A list of every KPERS pension payment during the last four years is available for public view at kansasopengov.org.
Coalition member Terry Forsyth said CKKP’s main objective is to ensure that the Legislature doesn’t switch to a defined contribution plan or renege on what current employees and retirees have already earned. A move to a 401(k) model would add to the $8.3 billion problem, he said.
“If we switch to a defined contribution plan, we’re going to add $1.2 billion on top of our existing debt,” he said, referring to the state’s obligation to continue paying existing pensions as well as managing an entirely different 401(k) system.
“If you take future employees out (of the defined benefit plan), you’re going to harm the current system because they’re not going to be able to pay that unfunded liability.”
But it’s not clear how much a 401(k) system would cost the government or its employees, said Kristen Basso, public information officer for KPERS.
“It would depend on how many accounts were covered and what the (service provider) contracts look like. There are just so many variables,” she said.   
Sen. Jeff King, chair of the KPERS commission which is charged with finding a solution by Jan. 6, wouldn’t say if the study committee was leaning one way or another but did stress there is no intention of revoking any benefits already earned. The financial impacts of a defined contribution plan versus a defined benefits plan depend on specifics not yet determined, the Independence Republican said.
“We are trying to recognize that we have $8 billion in unfunded liabilities over the next 30 to 40 years in the KPERS system,” he said, adding that he is open to sticking with a defined benefit package, switching to a defined contribution plan or combining the two to create a hybrid retirement plan for public employees. “We’re looking for ways to reduce those liabilities in an efficient way that causes the least pain to taxpayers and to state workers.”
The KPERS study commission will reconvene at 9 a.m. Aug. 31 in the Topeka State House, room 346-5.
Forsyth, also director of the Kansas National Education Association, said if the people in power have their way, public employee pension plans will be drastically altered. And not for the betterment of the state or public employees, but for the betterment of their careers, he said.
“There are statesmen and there are politicians,” Forsyth said. “Right now, the push for a defined contribution plan is coming from the politicians, not the statesmen.”
Although public workers in Kansas make less than the average government worker nationwide, Carter said people have filled these positions because of the pension plans offered through KPERS.
“Usually one of the advantages to working in the private sector is you get more money, but less benefits. In the public sector, it’s less money but perhaps a little bit better benefits package,” she said.
Pensions are guaranteed, no matter what the market does, part of the reason the state is in its current situation. Returns on pension investments dwindled during the last decade but the amount pensioners receive has not.
When the recession of 2008 hit, typical 401(k) plans lost 50 percent of their value. The KPERS pension plan lost 28 percent.
“During a downturn, like 2008, the losses are not as great. So (public employees) are not experiencing as much risk on the market as if they had 401(k)s,” said CKKP Coordinator Levi Henry.
Despite the downturn, KPERS is still required to maintain existing pension levels.
A switch to a 401(k) system would result in uncertainty for retirees as the value of retirement accounts vary along with the value of the investments made in them until the individual retires.
“It’s hard enough to retain good employees,” Carter said. “Having good benefits is one way to keep them.”

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