Thursday, December 22, 2011

Anti-government think tank targets our pension

Anti-government think tank targets our pension

The Texas Public Policy Foundation, a well-funded and powerful anti-government think tank based in Austin, held a “policy primer” on October 25 as part of a growing mobilization to attack public employees’ pension benefits. The TPPF released its document “Reforming Texas’ State & Local Pension Systems for the 21st Century” at the forum. One of the featured speakers was Bill King, a corporate lawyer from Houston who has started a business group whose goal is to eliminate public employees’ pension plans.

The TPPF proposal directly attacks the core of our pension systems. It was written for the TPPF by Arduin, Laffer, & Moore Econometrics (Arthur Laffer created the “Laffer Curve” economic theory). The authors state that “When a state or local government provides a defined benefit pension, the state is creating a government entitlement program. Entitlement programs violate the criteria of sound budgeting principles.”

Other excerpts and their recommendations follow. The entire text of this document is available on the Healthcare / Pensions page of TSEU’s web site.

“Simply put, defined contribution plans are more appropriate for the modern workforce” (p. 7)
“The government compensation is designed to reward risk-averse behavior that keeps employees in the public sector and discourages people from transitioning between the public and private sectors.” (p. 7) [that is, defined benefit plans reduce turnover, and high turnover is good]
“If a hard freeze of Texas’ public pension systems is not desired, then Texas should implement . . . a soft freeze.” (p. 20)

A little about the Texas Public Policy Foundation
Their mission statement:
“The Foundation’s mission is to promote and defend liberty, personal responsibility, and free enterprise in Texas . . .”
Notable staff/leaders:
Chair: Dr. Wendy Lee Gramm
Chair emeritus: Dr. James Leininger (also a major funder)
Directors include: Arlene Wohlgemuth and Talmadge Heflin
Senior fellows include: Grover Norquist and Arthur Laffer
web site:

TPPF’s pension plan recommendations

Step 1: Freeze the defined benefit (DB) plan to all new and unvested public sector employees.
Step 2: All new or current unvested employees transferred to a defined contribution (DC) plan.
A) DC plan should meet average standards of a large private sector DC plan.
B) Attributes can include (rates should be actuarially verified)
i. No minimum length of service requirement for eligibility in the DC plan
ii. Participation in DC plan permitted on hire
iii. Non-matching contributions of up to 6.0 percent of pay immediate eligibility
iv. Employer match up to a set percentage of pay immediate eligibility
Step 3: Implement either hard freeze or soft freeze of system for current vested employees
A) Under a hard freeze, benefits earned at the time of the freeze honored
i. No public employee able to accrue new benefits.
ii. All vested public employees transferred to DC plan for any additional benefit
B) Under a soft freeze, the benefits for vested employees continue growing
i. Vested employees choose between staying in the DB system or switching to the DC system.
ii. Benefits, employee contributions, and COLAs should be altered so that the DC system is favored by most workers.
a) Raise employee contribution rates
b) Extend the salary period used for determining retirement benefits
c) Increase the age and service requirements for eligibility
d) Implement greater controls over post-retirement COLAs
C) Retirees will maintain their current benefits with changes to COLAs
If you have any questions, contact MIKE GROSS in the Austin TSEU office at 512.448.4225

For more details contact:
in the

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