401k-style plan | Pension360

Phoenix Politicians Weigh In On Pension Reform Measure

The Arizona Republic runs a great column every week where they ask a dozen major political players in Phoenix a question regarding an important issue.

This week, pensions were the issue. Specifically Proposition 487, which would shift new hires into a 401(k)-style system as opposed to a defined benefit plan.

There has been much debate over whether the law would impact police and firefighters, who are supposed to be shielded from the law.

Here’s what some Phoenix politicians had to say about the ballot measure, from the Arizona Republic:

We asked: Do you think Prop. 487 will impact the retirement benefits of current or future police officers and firefighters? Why or why not?

“Whatever the long-term impact of the proposition, it’s likely that if it’s passed, it will take years in court to clarify its true intent. The losers will be Phoenix taxpayers, who will bear the costs of a prolonged legal debate.”

— Thelda Williams,District 1, northwest Phoenix

“No. I don’t believe that ‘preamble’ is an accurate term given voters will support or oppose the measure in its entirety, including this language from Page 1 in the ‘preamble:’ ‘This Act is not intended to affect individuals who are members of, or are eligible to join, any other public retirement system in the State of Arizona such as the Public Safety Employees’ Retirement System.’ While I understand those in the system are unhappy with this initiative, the alternative is to do nothing. That is not acceptable. Inaction by the council led to this citizen action in the first place.”

— Jim Waring,vice mayor (District 2), northeast Phoenix

“Prop. 487, as written, impacts the retirement benefits of current and future public-safety personnel and does not exclude these employees as stated in the preamble. According to city analysis, Section 2.2 (C) runs counter to the current Public Safety Personnel Retirement Plan that is required by state statute for current and future public-safety employees. Therefore, future contributions to this plan would not be warranted and current public-safety employees would have these benefits frozen. Prop. 487 also prevents contributions to additional plans such as the Medical Expense Reimbursement Plan, Post Employment Health Plan and Fire Employee Benefit Trust.”

— Michael Nowakowski,District 7, southwest Phoenix and parts of downtown

“Prop. 487 will absolutely impact police and firefighters. The only section of the measure that would have the force of law makes no special exemptions for public safety — whether that was the intent of who wrote it or not. Prop. 487 is the wrong reform. It is poorly written and will have devastating effects on taxpayers, police officers and firefighters alike. These brave men and women work every day to make sure that we are safe, and we owe it to them to protect their retirement. I urge Phoenix residents to vote no on Prop. 487.”

— Daniel Valenzuela,District 5, Maryvale and west Phoenix

“The proponents of Prop. 487 did a sloppy job drafting this initiative. Prop. 487’s backers claim any harm to public-safety personnel was a careless mistake. However, this doesn’t square away with what proponents are actually trying to put in our city charter. Prop. 487 amends our charter with poorly-written language that would cost millions, making it harder for us to fund infrastructure improvements. The best-case scenario for first responders under Prop. 487 is that their status will be in jeopardy, potentially for years, as the fate of their benefits is determined by the courts following expensive litigation.”

— Kate Gallego, District 8, southwest Phoenix and parts of downtown

“Voters can fix the broken pension system, saving $500 million, by voting yes on Prop. 487. The government unions have waged an all-out campaign of disinformation to stop pension reform. Prop. 487 does not impact public safety because: 1. Public-safety pensions are administered by the state, not the city. 2. State law doesn’t allow participants in PSPRS to opt out. 3. The initiative clearly states that it does notaffect public-safety personnel. Escalating pension costs means fewer services, less police and more taxes and fees. Prop. 487 brings financial accountability. Don’t believe the disinformation the government unions are propagating.”

— Sal DiCiccio, District 6, Ahwatukee and east Phoenix

“Fellow Phoenix residents, I call it the way I see it. Prop. 487 is confusing and poorly written. If it passes, it could end up in court with the potential for millions of dollars going to legal fees, instead of supporting vital programs and services for our community. In addition, Prop. 487 could have detrimental consequences for our public-safety personnel and other city employees. Specifically, Prop. 487 could end defined-benefit pensions for Phoenix police officers and firefighters, making the women and men of public safety the only public-safety personnel in Arizona who could not earn a defined-benefit pension. Our police officers and firefighters work hard to keep our community safe, and we as a community should protect our public safety personnel’s retirement. This proposition is not the way to reform our city’s pension plan.”

— Laura Pastor,District 4, central and parts of west Phoenix

“Yes. Prop. 487 will hurt our current police officers and fire fighters, and could even end death and disability benefits for our first responders. It is one of the many reasons why I oppose this initiative. The plain language prevents the City from making contributions to the state public safety pension system. Those behind the effort have not had this intent, but this initiative was so poorly written – so badly constructed – that it will have devastating consequences for Phoenix. On top of that, it will cost taxpayers $350 million. It’s the wrong reform, and we can’t afford it.”

— Greg Stanton, mayor

Money has flooded into Phoenix in recent weeks to fund both opponents and proponents of the law. But the source of much of that money is shrouded in secrecy, as Pension360 wrote on Monday.

Pennsylvania Candidate Wolf Doubles Down on Pension Stance

Pension reform has been a center-stage issue since May in the race for Pennsylvania governor.

During an interview this week with the Philadelphia Public School Notebook, Democratic candidate Tom Wolf forcefully doubled down on his position that pension reform isn’t the state’s fiscal priority. The exchange:

Q: How is the escalating cost of pensions impacting school financing in Pennsylvania, and what do you think should be done about it?

A: Our current pension situation is the direct result of almost 10 years of leaders in Harrisburg kicking the can down the road and the state paying less than its fair share. What we’re seeing from Gov. Corbett is more political games – he is pushing a plan that creates no immediate savings for taxpayers.

As governor, I will let Act 120 [a 2010 law reducing pension benefits to new employees] work and create innovative solutions that are fiscally responsible and fair and beneficial to taxpayers and future employees.

A further explanation of how the two candidates differ on the issue of pensions, from the Times-Herald:

Corbett says the burgeoning cost of Pennsylvania’s public pensions is a crisis that requires prompt, decisive action. Wolf argues that it’s a problem that can be resolved in the years ahead.

Corbett wants to scale back pensions for future school and state employees as a meaningful step toward savings. He says the taxpayers’ share of the pension costs for current employees — $2.1 billion this year — is crowding out funding for other programs and helping drive up local property taxes.

Wolf contends that the pension problems are partly the result of the state contributing less than its fair share of the costs for nearly a decade and that a 2010 law reducing pension promises to future employees and refinancing existing obligations needs more time to work.

Act 120 was a 2010 law that reduced pension benefits for some employees but kept intact the current defined benefit system. Wolf has been adamant that the law needs time to work.

Corbett wants to shift new workers into a 401(k)-type plan.

Photo Credit: “TomWolfYuengling” by Tom Wolf. Licensed under Creative Commons Attribution 2.0 via Wikimedia Commons

State Law May Stand In Way of Phoenix Pension Cuts

A Phoenix ballot initiative – titled Proposition 487 – would block off the city’s traditional pension system from all new hires, and instead shift those employees into a new, 401(k)-style plan.

The measure, if passed, would not apply to the city’s police and firefighters. But opponents of the reform are now saying that a legal quirk could end up blocking benefits for all of the city’s 4,000 police officers and firefighters. Reported by the Arizona Republic:

The initiative targets the retirement plan for general city workers hired in the future. Although the measure’s preamble states it’s not intended to affect first responders, attorneys for Phoenix have said the actual language, specifically the amendment to the City Charter, is poorly written and could wind up blocking pension contributions for existing and future police and fire.

However, several areas of state law, including the Arizona Constitution and provisions creating the Public Safety Personnel Retirement System, could prohibit Phoenix from ever withdrawing from the plan or diminishing retirement benefits for existing employees, attorneys said.

[…]

[Attorney Robert] Klausner said the likely result is that the Public Safety Personnel Retirement System would have to sue Phoenix or stop crediting its police and firefighters for additional years of service. Ultimately, he said, the city is in an “impossible conundrum” that it would probably lose.

“No matter what you do, you’re violating the law and welcoming a lawsuit,” Klausner said. “All that does is make lawyers really happy.”

Proponents of the reform measure have accused opponents of “scare-mongering”. From the Arizona Republic:

Scot Mussi, chairman of the group, said it’s clear that the city could not legally stop its payments to the state pension system. He said “scare mongering” Phoenix officials have suggested it could apply to public-safety workers to trick voters.

“That’s just crazy,” Mussi said of the argument regarding police and firefighters. “It would be unconstitutional. It would violate state law, and it goes against what’s expressed in the initiative itself.”

The fight over the measure has been going on for several weeks now. Opponents had earlier claimed that the measure would also unintentionally cut benefits for disabled workers.

Do Illinois’ Candidates For Governor Need A Pension “Reality Check”?

Pensions are one of many issues taking a prominent hold in the race for the Illinois governorship.

Both candidates, Pat Quinn and Bruce Rauner, recently sat down in front of the Chicago Tribune’s editorial board for an informal debate on, among other issues, how they would each handle the state’s pension crisis.

One member of the Chicago Tribune’s editorial board, Eric Zorn, listened to both sides. Now he says both Quinn and Rauner need to stop living in their “pension fantasies”.

On Quinn, Zorn writes:

Gov. Pat Quinn says he doesn’t need a “Plan B” to address the problem because he believes the Illinois Supreme Court will uphold the pension reform law he signed in December.

[…]

Quinn’s faith in the Illinois Supreme Court is farfetched. In July, the court issued a thumping 6-1 ruling striking down a previous legislative effort to cut health care subsidies to state retirees and employing language that seemed to serve as a funeral oration for the pension reform law.

Addressing the state’s “but we can’t afford to provide the benefits we promised!” argument, the majority wrote that the unequivocal pension protection clause in the Illinois Constitution “was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.”

Even if Quinn genuinely has hope that the court will gymnastically OK the pending law nevertheless, he still owes it to us to reveal what he proposes to do when — I mean if — those hopes are dashed.

Zorn then shifts to Rauner and his plan to shift Illinois workers into a 401(k)-style system:

Rauner owes it to us to explain why his ideas — he admits they’ve yet to rise to the level of a plan — are any more likely to survive court challenges than the bipartisan reform law, which he strenuously opposed.

…When I asked if joining such a plan would be mandatory, spokesman Mike Schrimpf echoed word-for-word the dodge Rauner employed in his Tribune candidate questionnaire: “We need to wait to see the parameters of what the Supreme Court says in order to carefully craft a plan that will pass constitutional muster.”

Mandatory enrollment of current public employees into 401(k)-style accounts by which they will ultimately fund their own retirements would likely not pass that muster. They’re generally not as lucrative for employees as plans that guarantee monthly pension payments.

Rauner knows this. It’s why he’s promised to allow police officers and firefighters to keep their “special retirement” that includes a standard pension, and why he projects “billions” in savings.

Zorn also decried the administrative costs associated with 401(k) plans. You can read his full editorial here (subscription required).

Photo by Chris Eaves via Flickr CC License

Pennsylvania Lawmakers Return From Break, But Pension Reform Remains On Backburner

Pennsylvania lawmakers returned to the capitol this week to convene for the fall legislative session. While they were out, Gov. Tom Corbett traveled around the state and continued to try to drum up public support for pension reform and his re-election.

But the pension reform bill currently in the House seems unlikely to go anywhere; lawmakers now have other bills on their mind. Reported by the Pittsburgh Post-Gazette:

Legislators returning today to the Capitol are expected to take up several bills during their month-long stint before the election, but there is little sign yet that the pension overhaul promoted by Gov. Tom Corbett will be among those headed to his desk.

House Republicans’ efforts to pass the legislation remaking retirement benefits for future state and public school workers consumed significant energy in the lead-up to the signing of the state budget in July. Mr. Corbett urged legislators to send him the bill, which would limit the defined pension benefit while adding a 401(k)-style plan, but with Democrats opposed, Republicans in the House were unable to rally enough votes from their own ranks.

The Republican governor embarked on a statewide tour to emphasize the costs of the existing systems, while House Republicans say they met to discuss pensions throughout the summer.

“We’re still within striking distance,” Steve Miskin, a spokesman for House Majority Leader Mike Turzai, R-Marshall, said last week.

If the bill were to clear the House, it would face another hurdle in the Senate, where members instead approved a bill to move elected officials from the traditional pensions systems to 401(k)-style defined contribution plans.

The bills that are taking precedence over pension reform include a proposal to increase taxes on cigarettes and legislation surrounding ride-sharing programs such as Uber and Lyft.

Democrats are also working on raising the state’s minimum wage and securing more education funding.

Photo: Chesapeake Bay Program via Flickr CC License

Video: Pennsylvania’s Pension Predicament

The 2014 CSG National Conference was held last month, but videos of the presentations are just beginning to surface.

This presentation, on public pensions in Pensylvania, was given by state Senator Pat Browne (R).

Sen. Browne has previously proposed and supported legislation to shift workers into a 401(k)-style plan. In 2012, he said:

“Significant policy decisions regarding Pennsylvania’s pension system must be made soon,” Senator Browne said. “Without significant changes in the design of Pennsylvania’s pension system, including a switch to a defined contribution system, the long-term costs will be unaffordable to Pennsylvania taxpayers.”

“Over the past few decades, virtually all of the private sector has shifted to defined contribution retirement plans,” Senator Pileggi said. “It’s time for Pennsylvania government to do the same.”

“A switch to a defined contribution plan will benefit Pennsylvania taxpayers by forcing fiscal discipline,” Senator Corman said. “Retiree benefits will become predictable and sustainable, costs will be easily defined, and future liabilities will be fully funded; it’s an excellent choice prospectively.”

Browne is a board member on the Public Employee Retirement Commission and the Public School Employees’ Retirement System board

Critics, Unions Bash Phoenix Pension Proposal

Labor groups and others in Phoenix are expressing outrage over a pension reform proposal – titled Proposition 487 – that would shift all new hires by the city into a new, 401(k)-style plan as opposed to the traditional pension plan that workers currently belong to.

The critics claim the new plan would cut benefits for disabled workers cut death benefits, as well. Reported by the Arizona Republic:

Opponents of a ballot initiative to end Phoenix’s employee pension system are raising concerns it could curb benefits for disabled city workers and the survivors of dead police officers and firefighters.

[…]

The message comes as Phoenix’s firefighter union has jumped full force into the effort to persuade voters to reject the initiative in the Nov. 4 election, putting up hundreds of “NO! ON 487″ signs across the city and campaigning door-to-door.

Fire Fighters Opposed to Prop. 487, a political committee, recently posted a photo of a fireman’s daughter on its Facebook page, saying, “If Prop. 487 passes and the unthinkable were to happen to her dad at work, Claire and her mom would receive nothing. Taking line-of-duty death benefits from firefighters and police officers is simply wrong.”

As it stands, the family of a city employee who dies prematurely can receive a portion of his or her pension as a death benefit. An employee who is injured can retire early and collect a portion of his or her pension.

Supporters of the reform initiative claim that critics are trying to distract voters from the real issue: the sustainability of the city’s pension system. From the Arizona Republic:

Supporters of the initiative, also known as the Phoenix Pension Reform Act, contend the arguments about disability retirement and death benefits for first responders is a red herring meant to distract voters who have the chance to stop a costly pension system. The city’s costs for the pensions of civilian workers have soared to $129 million this year, up from $27.8 million in fiscal 2002.

Voters will vote on the ballot initiative on November 4.

Deprecated: Function get_magic_quotes_gpc() is deprecated in /home/mhuddelson/public_html/pension360.org/wp-includes/formatting.php on line 3712