State Senate explores shift to 401(k)-style plans
OLYMPIA, Wash (AP) - Many workers in Washington state government would be shifted out of pensions and into a 401(k)-style retirement system under a bill heard Monday in a state Senate committee.
The plan developed by Senate Majority Leader Rodney Tom would put new workers and those under the age of 45 into defined-contribution plans funded mostly by the employees. Tom said the idea is designed to give government workers more flexibility with their retirement savings and ease concerns of some taxpayers who may not want to find defined-benefit plans that are becoming less common in the private sector.
"It creates a little tension with our citizens who are actually footing the bill," Tom said of the ongoing use of pensions.
Opponents said the idea would make it more difficult to retain quality teachers and other employees while making it more difficult for workers to have a secure retirement.
Greg Devereux, executive director at the Washington Federation of State Employees, said he believes the proposed law would be subject to legal challenge. He said it would further destabilize the state workforce that has already faced cuts in recent years.
"We think this is merely a gratuitous attack on a workforce whose moral is already low," Devereux said.
Lawmakers did not vote on the bill Monday.
The specifics of the measure would shift workers under the age of 45 who are currently in the more recent iterations of the pension systems for public employees, teachers, other school employees and public safety workers.
Members of the new retirement savings plans would have to contribute between 5 percent and 7.5 percent of their salary to the accounts. Employers would also contribute to the plans - 80 cents for every $1 contributed by the worker. The State Investment Board would develop different investment options for members to utilize.
Tom said he has long-term concerns about the state pension system because its funding status is based on the state's investment board earning annual returns of nearly 8 percent.
The plan developed by Senate Majority Leader Rodney Tom would put new workers and those under the age of 45 into defined-contribution plans funded mostly by the employees. Tom said the idea is designed to give government workers more flexibility with their retirement savings and ease concerns of some taxpayers who may not want to find defined-benefit plans that are becoming less common in the private sector.
"It creates a little tension with our citizens who are actually footing the bill," Tom said of the ongoing use of pensions.
Opponents said the idea would make it more difficult to retain quality teachers and other employees while making it more difficult for workers to have a secure retirement.
Greg Devereux, executive director at the Washington Federation of State Employees, said he believes the proposed law would be subject to legal challenge. He said it would further destabilize the state workforce that has already faced cuts in recent years.
"We think this is merely a gratuitous attack on a workforce whose moral is already low," Devereux said.
Lawmakers did not vote on the bill Monday.
The specifics of the measure would shift workers under the age of 45 who are currently in the more recent iterations of the pension systems for public employees, teachers, other school employees and public safety workers.
Members of the new retirement savings plans would have to contribute between 5 percent and 7.5 percent of their salary to the accounts. Employers would also contribute to the plans - 80 cents for every $1 contributed by the worker. The State Investment Board would develop different investment options for members to utilize.
Tom said he has long-term concerns about the state pension system because its funding status is based on the state's investment board earning annual returns of nearly 8 percent.
I get this, sort of. In my opinion it should only apply to new hires. I'm old enough that this will have no impact on me but it is not fair to someone in their early forties who has worked 20+ years under the old system.
Let me guess, Rodney Tom is about 46 years old.
I would like to know, if the pensions are even funded for state workers?
Personally i think it's a good idea and it could take some burden off the taxpayers.
The problem is all these systems are broken. Pensions, SS, medicare, etc are all broken systems that our super smart lawmakers gut every chance they get so there's no money left and it ends up costing more to run them.
I work in the public safety sector and I can tell you my body will not allow me to work until I am 70, 60 at best. I do believe that the old union mentality needs to go. But what frustrates me is the general publicâs ignorance about unions or how their pensions are funded. This is just another politicianâs ploy to pit the general public against each other. These types of bills RARELY include the politicians themselves. Maybe shift your attention towards the office-bearers and their golden retirement plansâ¦they are the real crooks. Please follow the link if you would like to better understand pensions: http://www.truthaboutpensions.org/
Public employees.....welcome to the real world. Maybe, perhaps, you just might want to consider this empty gravy bowl is...uh, empty. If you want to move to another state, go, nothing is stopping you. Oh, and you think no one else can replace your expertise and proficiency, uh.....wake up before you get behind the wheel.
@raydawg"Public employees.....welcome to the real world", having worked in both and still working in both I can only say: "Private employees, try working in the public world". I'm paid better in private. My retirement is better (fund matching). My dental is better in private. My medical and vision is better in private. The only benefit I have in public is Due Process and a little better job security.
If people believe that this wonât impact all levels of governments in Washington State, they had better think again. Washingtonâs municipalities and school districts ability to recruit, hire, and retain quality personnel in positions such as teachers, and police officers in this state will take a real hit. You will have an exodus of quality Officers and Teachers under the age of 45 to other states that do have traditional pension systems in place.
@Phatharrius I actually think this is a great idea. As someone who works in the public sector, federal jobs pay more and offer better benefits. It is like they are a special class of citizen. FYI, thanks to the horrible management by the legislature we simply cannot afford to overpay and provide full benefits to state workers anymore. I see it as a system that is defunct, all they do is hire their friends, so you cannot even get into these special citizen class jobs.
@Phatharrius Really? Maybe WA could backfill this mass exodus of Officers and Teachers with some of the quality people who lost their jobs in the private sector. You may not have noticed but there have been quite a number of quality personnel who have lost their private sector jobs already. Oh, and those unemployed folks don't have pensions. Their funds have been used up by purchasing things like food.
@kaj @Phatharrius There are programs that allow college educated people without teaching degrees or teaching licenses to teach. The problem is attrition. They quit at an even higher rate than formally educated and trained teachers.
@Phatharrius I agree. One reason people used to seek employment in the public sector is the benefits package, which in years past made up for the lower salary. Not so any more, and it hasn't been so in many years now.
@Crashbox @Phatharrius Obamacare SCREWED ME out of my excellent benefits package. I didn't used to have to wonder if I could afford to go to the doctor. Now I do. I say let them deal with it too!
@slappywag@Crashbox@PhatharriusNo, your employer "SCREWED" you. He or she would rather not give up even a tiny extra portion of their profits to keep you insured. You are undervalued.
@slappywag @Crashbox @Phatharrius My benefits, which were already "Cadillac" got better with no additional cost to me. And no, I do NOT work for the government.
Excellent Idea for pensions, next Social Security. This could actually turn Social Security into a benefit worth looking forward instead of the paper route money it currently is.Â
@javajoe Actually, it is a terrible idea for the workers. I contributed the maximum to my company's 401(k) plan and I lost ALL the interest it earned. I would have been far better off investing that money in EE Savings Bonds. I have Bonds yielding 6% that I bought 20 years ago. If it weren't for my defined benefits pension and a quite decent Social Security benefit (about 50% more than my pension) I would be destitute.
@Furd @javajoe But a great idea for the citizens of Washington State, it is not fair that federal workers receive great pay and great benefits at the expense of tax payers. It is plain and simple, when the previous governors agreed to these benefits they should have prepared for can we pay these if our ecomomy falls. Quite simply the answer is no.
@javajoe  If you are at or near retirement, you should have the bulk of your investments in bonds and other safer options--not stocks!  Stocks offer greater returns at times, but also more potential for loss, and because of that volatility all investors need to shift away from stocks and rebalance their funds as they approach retirement.
Very generous, this "8%," especially when those in charge seem to have an aversion to any corporate entity making a profit of any size. Yes, all you Unionistas and and others, the pension fund is largely made up of investments in equities and bonds. In fact, we invest a large portion of our WPERS funds in evil energy companies.  How DARE they make a profit on the backs of the working class. All those that oppose investing in oil companies, tobacco companies and firearms companies should be free to invest their pension dollars in Green Energy and the  ACME Unicorn Retirement System.
I'm happy to see this, I hope it passes, and I hope it's implemented with other public workers. Â It's unrealistic to expect a constant and positive return on investment, and pensions are notoriously underfunded and based on pie-in-the-sky return rates.
Now if they could only apply the same thinking to Social Security...
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@Furd @Mike @MathBeHard I thought he/she wrote a very simple sentence, you might want to get a dictionary and take a business class.
So let me see if I understand.... State employees switching to a 401k reitirement plan would make it "more difficult for workers to have a secure retirement". Really? You mean State employees would have to act as though they were private sector employees?  Oh the humanity!
Welcome to Club Reality.  By the way, in case you want to thank us private sector folks for working until we're age 70+ to make certain your golden years are funded, you're welcome.  Â
@kaj Well said!
@kaj I work for public safety(paid by the taxpayer) and I completely agree with you kaj. It's embarrassing how we're paid by the taxpayer, who in turn, are struggling to even hang on to their jobs. That is why i'm getting out of the public sector in 2 years after I finish school. It's a principle thing.Â
You apparently are one of the few in public work that actually get it.  And, thank you for the work you do. My opnion isn't a dis to public workers; quite the contrary. It's more about math: Fewer jobs in private sector = less tax base for the public sector.Â
Anyone ever hear of a country called 'Greece'? We're headed there...
@Furd @kaj Guess what if you look at the statistics you will see that most responsible people are not having kids. Look at the younger generation, they are only having one. It is the people who are rewarded for having children by our state agencies that having 3- eight kids. The druggies keep having them to get the check, and CPS takes them from the hospital.
@MathBeHard @Furd Carousel! It's actually in the fine print of the ACA.
@MathBeHard @Furd  more and more babies??? are you being sarcastic?  40+% of whom will receive some sort of federal handout? Â
@Furd@kaj
I see. Let's implement the one child per family plan. Oh no, wait. That would mean less tax dollars for the public sector. Because, as we all know, the public sector will continue to flourish. Â
Or, perhaps we could ease up on our increased taxation which allows businesses to do their thing (the making of money) which allows growth which allows the actual hiring of people! Lots of people; even those evil ones who..hold on...opt to have two children.  And then those children will grow up to fund...the public sector! The circle will be complete.
Freedom. What a concept.@Furd But expecting people to pump out more and more babies is exactly what Social Security and pensions are based on--more people paying into the system to pay the retirees.
That or we start implementing the "Logan's Run" plan!
@kaj And yet people keep pumping out more and more babies that grow up to further dilute an over saturated work force. Don't people understand that when there are ten (or one hundred, or one thousand) people competing for the same job the employer will take the lowest cost option?
When there are a limited number of people who can (or will) do a job the value of those people increases. That means more wages and benefits accrue.
Morale. Their morale is low.Â
A bunch of people with a pension are looking to take that away from the next generation.Â
@leftcenterright Who is doing this
@Mike @leftcenterright  Elected officials have a retirement plan.  If this were to pass I hope elected officials have their pensions go the same way.
@Crashbox @Murigen @Mike @leftcenterright I think were living in different times.
@Mike @Murigen @leftcenterright I think we as citizens should use the initiative process to do two things. Enforce term limits for congressmen/women in our state and say no to pay and benefits for life.
@Murigen @Mike @leftcenterright Elected officials are under the Public Employees' Retirement System (PERS), and it does sound like it would apply to them as well. You can bet that the majority of them would not likely be positive toward it.
With respect to applying the new system to current employees under age 45, I doubt that it would stand up in court due to the decision in Bakenhus vs. Seattle (1956).
This is going on across the country. The only thing you can be sure of is the sponsoring politicians are getting their campaign coffers stuffed by the folks running the 401k!!!!
@Phareis Oh please, citizens are tired of the special class of citizens called the government worker. FYI my sister-in-law is a teacher who just cashed out her retirement.
@Phareis Oh boy... Do you know where the  public employee's pension monies are invested? With the same people that administer the 401K, deferred comp plans and the like.
Who won"t like to get annual returns nearly 8 percent. Don't count on it Banks are !.20% on 2 yr CD. Y do Banks or any body want your money when they can get it from the Government .8% or less.
This idea would empty out the younger workers from the existing defined benefit plans and destabilize the existing plans. Women returning to the workforce after their children are in school would not have enough years of work to see anything from a 401K style plan. Police who by necessity have to retire earlier than other jobs would not have enough work years for a 401K style to amount to anything. Just make sure the plans in existance are funded properly as they go and never borrow from them.
@memory9 Why do police get to only work 20 years and then live off the system for 40? Please I think if they set the system up so they moved to another area, we would all benefit instead of the special few.
@memory9 Not to mention what happens to your retirement if the stock market crashes and burns. How is gambling your retirement fund securing your living expenses for your old age? You can't get Welfare if you're old and in actuality there isn't much available in any kind of public assistance if you're elderly. Better keep that in mind.
@domino From the article: "...[I]ts funding status is based on the state's investment board earning annual returns of nearly 8 percent."
What do you think the investment board is investing the funds in to get this expected 8% return? Â There's no such thing as reward without risk.
@MathBeHard @domino Even during the lowest point of the market, i was making 6-9% returns on my 401k. Last quarter i made 17% return.
There's a common misconception that you lose money when your total goes down too, which is bs. You never lose money on your 401k until you sell the shares that aren't doing well. You can wait for them to come back up and then sell, which is the right and the smart thing to do, or you can sell because of impatience like a lot of people do.
@Mike I'll let you know right after I flip all my retirement investments into it. :-)