Your pay has been the subject of debate for the past couple of months, resulting in the President proposing and Congress passing a two year pay freeze.
But now the pay debate is turning to state and local government employees – some who receive outrageously generous retirement packages – in one case, to the tune of half a million dollars.
States are now turning to the federal government for a model of retirement benefits reform. A quarter century ago, the federal government adopted a hybrid pension system – a combination of a fixed pension, social security and a 401(k)-type plan.
The norm for state and local employees now is a defined benefit plan that guarantees a certain pension payment, immune from Wall Street’s performance.
The budget troubles of states and municipalities have turned greater attention to this system – and the abuses happening within in.
In one case in California, the former city administrator of a small town is collecting $520,000 in pensions, Washington Post national political correspondent Karen Tumulty reported.
This former administrator had worked five positions at the same time and was receiving a pension for each job, Tumulty said.
“A few bad actors can create a very distorted picture for everyone,” she said.
Tumulty reports that 19 states have reduced their pension liabilities and a dozen are considering a hybrid system that includes a 401(k)-type plan.
However, not all of these changes can happen immediately.
“There’s a problem in that you cannot change anything that has been promised a current employee in most places – and that of course is where the money is,” Tumulty said.
Some employee unions – such as the American Federation of State, County and Municipal Employees – are dedicated to the defined benefit pension.
Tumulty said, “I think they’re fighting against a tide here.”