Retiree group worried about what may happen if new contributors placed in 401(k)-style pension plan
04/20/2017 06:14 PM
As the executive branch works behind closed doors to develop its plan to reform the tax code and pension systems, one group is both thankful for the push and weary of certain changes.
Jim Carroll, co-founder of the group Kentucky Government Retirees, remarked on the previous legislative fixes, which have included more money dedicated to paying down the liabilities to the retirement systems, and what he’s watching for in a special session in an interview with Spectrum News this week.
Carroll believes the pension system risks insolvency if lawmakers can’t dedicate more revenue to paying down the pension debt.
“The risk is there, but there shouldn’t be a risk in any defined-benefit plan of literally running out of money,” he said.
Among the ideas that have been floated on pension tweaks include creating an entirely new pension 401(k)-style plan for new state workers. However, Carroll worries about what that would mean for the current “legacy plans.”
“Our concern is what would happen to the legacy plans — the existing defined benefit plan — if you wall them off to new contributors,” Carroll said (5:15 in the interview).
Tax reform needs to work hand-in-hand with pension reforms to generate enough revenue to pay for the actuarial required contribution plus additional revenue into the pension system in order to pay down the unfunded liability, he said.
“We’ve got to have new revenue,” he said. “As an organization, we’re a retiree advocacy group, we don’t take a position on how we get there. We just know we need to get there.”
“We already now the cash balance plan will reduce the long term cost because the benefits are simply not as substantial,” Carroll added.
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