Defined benefits vs. defined contributions: pros & cons
These are the pros'n'cons of Defined Benefit (DB) Pension Plans and Defined Contribution (DC) Pension Plans... as set forth for staff. And I don't necessarily agree with this as written, but it does give a good idea of lot of the pros'n'cons:
Additionally, I understand that since my June 24 request to eliminate DB plans for (then) future non-union employees... we've hired about a half dozen new staff. New staff that could been given a DC plan - but got a DB plan... a DB plan that has recently dropped by probably 33% in value. And guess who picks up the tab for that?
Leadership matters and action counts. Twiddling your thumbs could be done by anyone.
Tim White
5 comments:
This is an apples to oranges comparison and not totally accurate.
1. Employer contributions are not at the sole discretion of the town- the town doesn't have to contribute anything if that is what they want. You will be hard pressed to find a govt 457 plan where the employer contributes
2. Increasing/decreasing employer contributions due to market- some would say that having a fixed amount is a good thing, especially right now with the liabilities rising as plan value drops...smoothing techniques??
3. Parity between plans- why do they have to be equal. Give new hires a DC plan and thats it...take it or leave it. I don't by the fact that it will hurt recruiting efforts- times are tough, people need jobs.
4.Appropriate investments for all employee levels and educational training- all plans have a portfolio of appropriate investments and most vendors would offer 457 plan participants a local office or reps that educate and offer advice- this one shows me that 'staff' hasnt spoken to anyone in the DC business.
5. gauranteed retirement benefit- thats why they call it defined contribution and not defined benefit....401ks dont gaurantee anything and most people/tax payers have them.
It seems like the town staff doesn't want this....is anyone thinking about what is best for the town financially?
(# 3) take it or leave it,people need jobs.
PUBLIC SECTOR EMPLOYEES MUST BE LUCKY TO GET A JOB AS THEY ARE OTHERWISE UNEMPLOYABLE. YOU MUST BE A PAST TOWN COUCILMAN....
WE THANK YOU FOR YOUR SUPPORT.
BY THEY WAY, PLOW YOUR OWN ROAD, EDUCATE AT HOME, SOLVE YOUR OWN CRIMES, PUT OUT YOUR OWN FIRES.. THE LIST GOES ON.
(#4)"STAFF" would apparently not be smart enough to look into a Investment Advisor for such things, why do we employee such people.
(#5) By the way, as an employee of the town,and resident, I too pay taxes and my taxes go back to pay my salary, and benefits - should I be tax exempt so that said tax money could pay for my 401, sounds reasonable to me.
The town has a lot of good, hardworking ee's. Obviously, not everyone is great... and with more than 200 FTEs, at least a few are going to be not-so-great.
Also keep in mind though... I'm still very concerned about employee morale. And frankly, while I haven't been mentioning it here much recently, I see no reason to believe that the relationship between senior management and their subordinates has gotten any better in the past six months - because I've heard otherwise. And I think it's very difficult for most people to performance extremely well when they have such big differences with their managers.
Regardless, I still think we should stop offering DBs to future non-union EEs and negotiate from DBs to DCs with unions for future union EEs.
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