 |
|
|
|
|
|
|
|
|
|
|
|
 |
|
||||||||||
 |
 |
 |
|
||||||||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
|
 |
 |
 |
 |
 |
|
||||||
State pension fund proposals raise eyebrows
Sunday, March 1, 1998
Jeff E. Schapiro
Slowly but surely, the General Assembly is nudging the state pension fund toward dramatic change. Some public employees don't like it.
Three bills before the 1998 legislature would require the Virginia Retirement System to provide 401(k)-type pensions for about 80 high-ranking political appointees,
a dozen big-city school superintendents and upward of 20,000 part-time volunteer firefighters and rescue squad members.
These would be defined-contribution plans under which employees would manage their own pensions. That's a big deal for VRS, whose approach to pensions brings to mind the adage about the Ford Model-T: Pick any color as long as it's black.
With $29 billion in assets and 356,000 active and retired members and beneficiaries, VRS is a defined-benefit plan. In other words, benefits are literally defined -- and guaranteed -- by law. Pensions are derived from investment decisions made by VRS alone.
So why is the assembly pushing defined contributions, forms of which are available to government employees in five states, including West Virginia?
In a word: portability. Workers can take their money to other plans when they change jobs. That's important for the people covered by those pending bills: the superintendent who takes an out-of-state post or patronage worker whose job depends on the sufferance of others.
"All of those arguments apply to every state employee, every teacher and every local employee," said VRS Chairman Edwin T. Burton III, a longtime proponent of a defined-contribution option for all public workers.
Not without risk
But a defined-contribution program is not without risk.
For starters, employees must make their own investment decisions. That means doing more than watching "Wall Street Week." Also, the state would be virtually free of responsibility for paying for retirement, except matching contributions.
Get the impression that this issue is about big money? Were Virginia to move big time to self-managed pensions, there could be millions more for the legislators to spend on their pet projects and other priorities du jour.
In contrast, a defined-benefits program like VRS is fully backed by taxpayers. They would face an enormous bill -- one they would be legally required to pay -- if VRS collapsed.
That's just fine with some worker groups, among them the Democratic-leaning Virginia Education Association. Ralph Shotwell, a pensions expert for the teachers' union, said he worries that a 401(k)-type plan could weaken VRS as a primary benefits provider.
Generation gap
The pension debate also has a generational dimension.
Older employees nearing retirement probably won't be interested in switching from defined benefit to contributions. Less risk-averse yuppies and former Gen-X'ers may act otherwise, especially with the stock market moving almost daily into uncharted territory.
Burton is virtually alone among the nine VRS trustees in his advocacy of a defined-contribution option. He wants the assembly, perhaps next year, to authorize a study as a first step toward forging a consensus on this issue.
If the remarks of Del. Lacey E. Putney, I-Bedford, are an indication, Burton may be on his way.
Putney, head of the House subcommittee that handles worker compensation, doubts that many workers would be interested in a defined-contribution program, "But that doesn't mean we can't take a look at the . . . option."
Gov. George Allen wanted to do just that, but cut a retreat, in part, because employees perceived even a study as another punitive move by an administration viewed as hostile to the state work force.
Allen is gone, but the issue isn't.