Wednesday, November 9, 2011

NIRS response to "Race to the Top" proposal

November 2, 2011
Letters to the Editor
The Washington Post
1150 15th Street, NW
Washington, DC 20071

To the Editor,
The author of the October 28th opinion piece “How about a race to reform state pensions?” should take a look at the National Conference of State Legislatures (NCSL) report on public pension reform. NCSL documents that 39 states have taken action since 2010 to ensure the long-term sustainability of public pension funds.
These reforms include everything from increasing employee contribution rates, to raising retirement ages, and even suspending cost of living adjustments. All of these changes are absent Federal intervention, and state and local pensions are not seeking Federal assistance.
Another key fact excluded from the piece – pensions are not the driving force behind what ails state and local budgets. The Center on Budget and Policies determined that pension contributions average just 3.8 percent of state and local budgets. And in fact, in most states the majority of pension benefits are paid for with employee contributions and investment returns – not tax dollars.
The reality is that vast majority of plans were in a strong financial position before all investors were hurt by the economic crisis. The same cannot be said for the underfunded 401(k) system for private sector workers. Currently, the median 401(k) account balance is $18,000 – nowhere near the assets needed for Americans to be self-sufficient in retirement. This is particularly troublesome given the private sector trend away from pensions, and that the volatility of the stock market makes it difficult for Americans to predict their nest egg.
Research shows that an overwhelmingly majority of Americans believe that all workers should have access to a pension, and that the disappearance of pensions makes it impossible to achieve the “American Dream.” Perhaps the real area for reform is rebuilding the crumbling retirement infrastructure for private sector workers?
Diane Oakley. Executive Director

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