Congressman: It's Time to End Congressional Pensions

(December 16, 2011) — As the United States struggles through a burgeoning debt crisis, one congressman is clamoring to end congressional pensions.

While a majority of the private-sector workforce has seen their pensions slowly disappear, members of Congress receive both a pension and a quality employer-match plan.

“The rest of the country has been focused on state and local government pensions. So how has Washington been able to get away with pensions while the rest of the country loses theirs? Members of Congress pay far less into their pensions than other government workers while taxpayers kick in more,” Griffin told aiCIO in a telephone interview.

According to Griffin, the demise of congressional pensions would give federal lawmakers more credibility in addressing related financial issues.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

“Ultimately, this is about the next step. When you talk about congressional pensions, you’re talking about millions of dollars. This bill only deals with members of Congress — the gateway with which we have to travel to get credibility and political momentum to deal with the broader issue of federal pensions,” Griffin said, adding that his legislation is not a question of morality, but a question of affordability.

In mid-November, Griffin introduced legislation terminating congressional pensions for future elected officials. Two months earlier, Rep. Mike Coffman (R-Colo.) introduced stricter legislation to end lawmakers’ pensions.

“I make it clear that with regard to [federal] pensions, the legislation [I plan to introduce] would only impact the next generation of federal pensions — people who haven’t even started working for the fed government,” Griffin asserted.

When asked about the pension crisis in Europe compared to the US, Griffin said that the Europeans waited so long to address their pension crisis that they are now forced to impact people who depend on their pensions. “In the US, we are still early enough to fix it for the next generation,” he asserted, noting that a few states have started scaling back their programs, while others have been forced to ask for federal bailouts.

Click here to read Griffin’s proposed legislation.

DiNapoli Proposes National Commission to Address Retirement

Thomas DiNapoli, the New York state comptroller and sole trustee of the $147 billion New York State Common Retirement Fund, has suggested creating a national commission “to talk about ways to maintain existing defined benefit plans.”

(December 16, 2011) — Now is the time for a National Commission to address the decline of retirement security, asserts Thomas DiNapoli, the New York state comptroller and sole trustee of the $147 billion New York State Common Retirement Fund.

“The Commission must develop strategies to assure the continued viability of solid, well-funded defined benefit public pension plans and identify strategies to restore the finances of plans that have fallen into disrepair, DiNapoli stated in a wide-ranging discussion of the New York public pension system at the New School’s Schwartz Center for Economic Policy Analysis in New York City.

He continued: “Both in the ways government sponsors design and fund plans, it is critical to adhere to best practices. Guidance or mandates may need to come from federal action. On the investment side, there is much work to be done to ensure that pension fund trustees fulfill their fiduciary responsibilities. Best practices and federal law can help ensure that trustees pay careful attention to review of asset allocation, recoveries from litigation, and proper attention to the use of consultants and payment of commissions and fees.”

According to DiNapoli, the proposed Commission would focus on the longer-term problem of the erosion of retirement security. “We need to put a retirement system in place that allows the middle class to retire in dignity and forestalls the profound future costs on government and individual taxpayers of providing food, housing and other support to millions of Americans – living well into their nineties – who simply don’t have enough to support themselves,” he said.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

Furthermore, the Comptroller proposed that the Commission also evaluate whether federal laws should be amended to encourage consortiums of smaller pension plans with the goal of achieving the economies of scale in benefits and investments. He concluded: “With the gridlock in Washington and the lack of resources, this type of federal intervention for pensions today is unlikely. However, at the very least, instead of joining the race to the bottom to dismantle pension systems, this is the time to preserve pension plans that are proven to work, help those that need fixing, and tackle the larger question of what can be done for those not covered by pensions.”

DiNapoli has also been vocal about defending defined benefit (DB) plans. Defined contribution plans, the comptroller said, are not adequate to replace defined benefit plans. “The reality is that 401(k)s were never intended to take the place of pensions,” DiNapoli said.

According to DiNapoli, recent market turbulence is a reminder of the “inherent instability of 401(k)s and how daunting it can be for individuals with 401(k)s to navigate their way to a secure retirement…If that’s not enough of a reason to be wary of moving from pensions to 401(k)s, according to the National Institute on Retirement Security, defined benefit plans cost 46% less than individual 401(k) style savings accounts”