(June 13, 2013) – Earl Pomeroy, former US Representative of North Dakota, lauded public pension CIOs’ performance despite inconsistent contributions during a recent forum put on by TIAA-CREF and the Rockefeller Institute of Government.
Pomeroy suggested that state governments need to consistently fund their public pension systems, and they ought to increase incentives for personal savings. He noted many beneficial aspects of defined benefit (DB) plans: universal participation, professionally managed investments, longevity risk sharing, and annuitized income.
With knowledge of the poor decisions often make in regards to 401 (k) defined contribution (DC) plans; he viewed DC plans as a complements to the primary DB plans. While speaking specifically to state and local pension plans, Pomeroy argued, “dramatic reform is generally not warranted given the system’s success to date in providing retirement income security for public sector retirees.”
Pomeroy stressed the need for funding discipline in a time period where state and local government are taking pension holidays and slashing contributions. Pomeroy believed a hybrid DB/DC model would be both the most financially sound decision for the retirees and the government sponsors.
A retirement commission in North Carolina came to the same conclusion as Pomeroy. North Carolina Governor Pat McCrory established a commission to examine whether the current plan design of the state’s public employ pension system was appropriate for the next fifty years. Robert Clark, chair of the commission, also spoke at the forum and found the state needed to make no major changes to the existing defined benefit plan. He said “It was well funded and functioning as intended.”
The 13-person commission, made up of academics, state officials, and investment specialists, did recommend hybridizing the system to include defined contributions. A statewide 403 (b) plan was approved by the state legislator in 2011 and implemented in 2012.
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