The National Association of State Retirement
Administrators (NASRA) has issued a response to the
Reason study contending that the Foundation's arguments
are erroneous, chosen from a small example of public
pension plans, and do not consider the total effects of
switching public retirement systems from DB to defined
contribution plans.
NASRA points out that the nine pension systems Reason
uses to illustrate the public pension crisis, including San
Diego , Illinois, and Detroit, are not representative of
the more than 2,000 public pension plans in the US.
According to NASRA, "Any community this large is likely to
have its share of abuse and excess."
NASRA also notes that, as far as the pension funding
crisis, public pension plans, in aggregate are 88% funded,
and 70% of public pension plans are funded at 80% or
higher.
The falling stock market is the primary factor in the
funding crises for plans that increased benefits and
lowered contributions at a time when the stock market was
performing well (See
Feature: Their Own Worst Enemy
).
NASRA notes that investment earnings, and not selfish
objectives of lawmakers, had the greatest effect on changes
made to employer contributions to public DB plans.
According to NASRA, switching public retirement
systems to DC plans instead of DB would involve much cost
and have negative consequences, such as the inability of
public employers to attract and retain good talent.
NASRA argues that the public is best served when judges,
firefighters, teachers, and police officers are
career-oriented and long tenured, and the DB plan is a
central component of the compensation package for such
positions.
In its rebuttal to the study, NASRA states, "All else
held equal, if the DB plan is taken away, other
compensation costs would need to rise."
Losing the strong incentive of a DB plan would require
employers to make adjustments to compensation packages that
could include improved working conditions, better benefits,
or higher pay.
NASRA also contends that reason does not consider the
improved financial security of retired public
employees.
It says that data shows the financial security of Americans
in retirement has decreased as a result of the move from DB
to DC retirement plans.
Finally, NASRA points to the economic stimulus of
public pension assets.
"These effects include the investment of pension fund
assets in venture capital projects; the added liquidity and
stability added by public pension assets to financial
markets; and the stimulus provided to the nation's economy
as a result of the additional assets produced by higher
investment returns generated by public pension funds,"
according to the response.
In conclusion, NASRA states that the focus of the
DB plan debate should focus on what plan design could be
implemented to meet stakeholder objectives and increase
public pension intergenerational equity and transparency
of cost, and what positive attributes of DB plans can be
extended to private sector workers.
The Reason Foundation study is
here
.
The NASRA response is
here
.