Give Elected Officials 401(k) Plans
Lately, there has been a lot of talk by the elected officials in many States, on ending pensions for public employees such as teachers, firefighters and police. Some of them even enacted on these talks, to pass laws to end guaranteed pension plans and turn them into 401 (k) option.
And I say, let’s do the same for them:
It is time for all elected officials, from the $186,000-a-year congressman to the small-town mayor, to no longer have taxpayer-funded pensions, but rather take a portion of their salaries and put them in 401(k) plans.
With the types of benefit plans elected officials receive in all sizes of government, this idea should resonate in all 50 states and should have universal appeal, regardless of party affiliation.
How would it be done? Through binding referendums that would be voted in each state in November 2014. Realistically, we have about one year to get this measure placed on ballots throughout the country.
The question could be, “Should the state of (fill in the blank) end all pensions for elected public officials and in return allow them to have 401(k) investment plans?” I think the question would win handily.
By instituting such a change, gone will be the days in which a politician can have three or more taxpayer-funded pensions at the same time. The sheriff in my county has about an 80 percent pension and a salary of more than $100,000 a year. He is about 60 years old. This means that he will receive at least $80,000 a year for the rest of his life. If he lives 20 more years, that is $1.6 million of taxpayer dollars for one retired public official, kind of like winning the lottery.
Anyone who is making a public official’s salary should be able to put a portion of his or her pay into a 401(k), which is a defined contribution plan. After all, isn’t that what the politicians have wanted to do to teachers and other public employees?
However, those teachers and maintenance people usually are not making the large salaries and certainly are not able to piggyback more than one pension like an elected official can do.
From Capitol Hill to the local village board, the message of the times has been to slash costs, and a 401(k) appears to be the preferred option for providing retirement funds as elected officials attempt to dismantle the public employee pension system.
So if 401(k)s are a perfect idea for the business world and government workers, then they should be just as acceptable for elected officials. After all, don’t many politicians say that government should be run like a business? I think all states could institute this change for every elected office. If states can set term limits for senators and congressmen, then why not change the way their retirements are funded?
And imagine the savings. The responsibility of funding a retirement would be up to the public official. Taxpayer liability would end as soon as the person leaves office. This would be the natural progression that started when corporations began phasing out pensions in the manufacturing sector.
Through the 1980s, pensions were the most popular and common type of retirement program. According to the U.S. Department of Labor, 60 percent of workers in 1980 were covered by defined benefit plans. That number dropped to 15 percent in 1999.
On the reverse side, 18 percent of workers in 1980 had defined contribution plans. In 1999, the number soared to 58 percent. In 1980, defined benefits made up 35 percent of all plans, and by 1999 defined contributions made up 85 percent of all plans.
The 401(k)s became the only option for white-collar workers. This path of taking away pensions started in the late 1980s, then caught fire in the 1990s as businesses began looking for ways to cut worker costs and maintain profits.
My second full-time job as a daily newspaper reporter offered a defined contribution plan, but with a sweetener from the company. Originally, the company would match my contribution up to 5 percent, and put in an additional kick tied to inflation, which at that time was 9 percent. Each year, the sweetener got a little more sour, until the company ended its match and stopped the raise tied to inflation.
Now, pensions are nearly unheard of, except in the public sector. However, the move is on by elected officials, from county boards to the halls of Congress, to end pension programs for their employees and instead put them on defined contribution plans.
So, if elected officials prefer 401(k)s for their workers, then they should have no problem accepting the same setup for themselves, right? State Sen. Mike Fasano in Florida proposed cutting the pensions for elected officials. Fasano’s bill died in committee without a vote.
Another state that has proponents who want to eliminate pensions for elected officials is New Jersey. They make their proposals at savejersey.com.
In other words, this effort to cut public pensions can spread like wildfire by the people and for the people. By putting the question on referendums in every state, we can bypass the politicians who will do nothing to hurt their retirement windfalls.
Can we trust politicians to do the right thing and cut or eliminate their pensions? Unfortunately, no. They have forgotten who they work for. It is time to remind them.
This revolution needs to start, so why not now? Many of these double- and triple-dipping elected officials see nothing wrong with criticizing the pensions of low-wage public employees.
Every state has different rules regarding the placement of a referendum on the ballot. Supporters of this measure would need to follow guidelines closely, so that their question could not be challenged by the politicians and pulled from the ballot.
Now is the time for the people to speak and say the travesty of paying elected officials taxpayer-funded pensions for the rest of their lives must end.
To learn more about the difference between the defined benefits (DB) and defined contribution (DC) plans, you can read “Differences between defined benefit and defined contribution plans.”