Thursday, January 15, 2009

$15,000,000 pension deficit, but defined contribution pension plans are "too expensive"

I know pension plans and long-term liabilities can be boring… though I suspect we’re all somewhat interested in them at this point. The following YouTube clip is of me giving my January 2009 liaison report for the Retirement Advisory Board:

And if you watch the clip, you know the Town’s taxpayers currently face a $15,000,000 deficit in the Town’s defined benefit pension plan.

This deficit is precisely why I’ve been encouraging the Council to move from a defined benefit plan (DB) to a defined contribution plan (DC)… for years now… to little avail.*

The current Council majority had the opportunity to begin the move from DB plans to DC plans in October 2006 via collective bargaining. The Council decided it was too expensive.

Fast forward to June 2008… I refined my argument for DC plans and suggested the Council eliminate DB plans for future non-union employees… again to no avail.

I wonder if they still feel it’s too expensive?

In my opinion, this inaction is a disservice to taxpayers and to employees… more on that next week.

Tim White

* Some ee's have DC plans, but far too few in my opinion.


Anonymous said...

This is not 1950.
The TC needs to look into this and make the changes now. People are living longer and we can't afford to hand out this sort of pension in a DB plan.
Why is it that the public sector seems to feel they deserve this entitlement when the rest of us in the private sector need to contribute to a 401K(that has drastically dropped over the past year)in order to get a retirement?
In the words of our new president:
"It's time for change!"

Breachway said...

You are right on with this Tim. I think the TC members need to be educated a bit more on the pros and cons of each and specifically how a DC plan works....I work with DC plans all day long...401k, 401a, 403b and 457s...I could reel off a long list of municipalities and state govts that have DC plans. DB may have looked good in booming markets as your annual contribution liability decreased due to plans' return exceeding expectations. The argument that it will hurt recruiting efforts because it decreases the pay package is dumb. There are more than enough people who will take a job w/o a DB plan because most employers don't have them to begin with. It can be an added benefit even for those on the DB plan. Most govt entities offer a DC plan to their DB employees also. It gives them another avenue of savings. I get the feeling from one of the meetings I watched that TC members think you have to have an employer contribution/match to fund a DC plan that you would offer to a new employee. Not one of the govt entities that we service(we are one of the biggest providers of these)contribute to the employees DC plan.

Anonymous said...

Breachway is right.
Many of the smaller, private sector companies are not matching in any way, so it is all up to the employee.
Wake up people, we are in a recession here.

Anonymous said...

you all are banging your head against the wall. the bottom line in this town: they are here for the school system, they will put up with minor annoyances and when their kids graduate they LEAVE TOWN!! NO ONE CARES!!

Anonymous said...

About three years ago there was a guy on the Council (Shrum I think) who pushed the issue of phasing out the current plan because sooner or later the financial chickens would come home to roost. Esty and the majority Dems ditched the idea....."too expensive".
We need more people who will change the underlying drivers of bigger government not just people who whine about "tough times" when the all-too-predictable s--t hits the fan. Where are the people who think ten years down the road....not just until the next election?