By Rick Shimmel, Citizens for Retirement Security
Proponents of a ballot measure to undermine retirement security for Ventura County employees are proposing to switch new workers to a 401(k) plan. As this report from Alaska points out, that’s exactly what has gotten that state into deep fiscal trouble – enough to get a Republican lawmaker to label the move “a mistake.”
As reported in the Alaska Dispatch (4/11/14), “Legislators struggling to find ways to pay off the $12 billion in unfunded pension liability threatening to overwhelm state budgets for years to come are trying to finger who is responsible and where the blame lies.”
Representative Mike Hawker, R-Anchorage, said, “I very much was concerned when we closed our retirement systems and went to a defined contribution that by closing those systems we were going to find ourselves in the position we are in today, which was ultimately having to step in with a significant financial bailout.”
“That switch was a mistake,” said Hawker.
The AP reported in 2006 that Alaska’s unfunded liability on its prior defined benefit pension plan was between $5.7B and $6.2B. That’s when the state made the switch to a new defined contribution, 401(k) style plan for all new employees. “We think this change will stop the so-called bleeding,” said then-Gov. Frank Murkowski.
The unfunded liability is now estimated at $11.9 billion.
“I really think we could have worked through this and not been in such dire circumstances if we hadn’t made that decision then [to switch plans],” said Hawker, as new employees no longer help pay into the underfunded plans.
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