Liu pivots from pension risks to benefits for workers without retirement security

Monday, March 26, 2012 - 04:07 PM

Colby Hamilton / WNYC

For a while, the conversation around pensions has primarily been focused on the cost and risk public pensions present to their fiscal backstops, the taxpayers. During this year’s budget negotiations Governor Andrew Cuomo pushed for changes to the system for future public employees. They were needed, he said, because New York’s state and local governments could not afford the system as-is. He was at least partially successful.

Now, the man in charge of the city’s pension system, Comptroller John Liu, wants to change the focus on pensions, from the debate over their sustainability to a wider discussion about retirement security, and the positive role public pension funds could play.

On Monday, Liu joined Dr. Teresa Ghilarducci, director of the New School’s Schwartz Center for Economic Policy Analysis, to promote an idea they say could help the 60 percent or so of New Yorkers currently without a retirement plan by allowing them to buy into the public pension system.

“Our city’s already experiencing the beginning of a burgeoning retirement crisis,” Liu said in his remarks before Ghilarducci’s presentation. “If we don’t help people prepare for their retirements now, the strain on the city’s social service network from seniors living in poverty will be overwhelming. And clearly we are a city that does not, nor will we ever be, a city that will leave its seniors homeless or hungry in any way.”

According to research done by the Comptroller’s office and the Schwartz Center, the percentage of employers offering their workers a retirement plan fell from 48 percent to 40 percent in the last decade.  Within those numbers are a wide racial divide as well. While a little over half of white New York City workers had access to a retirement plan, only 38 percent of blacks, 30 percent of Hispanics and 26 percent of Asians had the same access.

The plan, presented by Dr. Ghilarducci, is similar to one moving through California’s legislative process right now. It would allow employers to offer their employees a personal retirement account run through and by the city’s pension system. The anticipation is it would guarantee a three percent return for the employees, but unlike the public pension fund, wouldn’t leave taxpayers on the hook.

While today’s proposal was presented in broad strokes—for example, the issue of whether employers would be mandated to offer the retirement account wasn’t included in the presentation—Liu said it was part of an ongoing effort by his office to move retirement security policy forward.

“This is a subject that seems to be swept under the rug all too often. All the current dialog and debate about pensions is about cost and the fact that the cost is no long affordable, never about the need for pensions and retirement security,” the Comptroller said. “We have to start stirring the debate on this issue and figure out what we as a city should do, conceptually.”


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Comments [3]

Larry Littlefield

Basically, this is equivalent to the public employee union opposition to a large part of Obamacare.  They want a system in which they have different, larger benefits than other workers.

According to additional information I have since read, the plan is to have public employees guaranteed pensions that can be retroactively enhanced at any time at  public expense.  The assumed rate of return is eight percent, with the taxpayers making up any difference.

But the private sector workers would have "cash value" pensions.  The value of the pension would depend on market returns, and would not be guaranteed, and the pension funds would shoot for a return of three percent.

Now consider France.  There all workers are covered by a state pension, payable after 40 years of work (though not in the same job).  Basically it's Social Security but with higher payouts -- payroll taxes are much higher there.  The public unions had gotten some special deals for retirement after 35 years, but that was just eliminated.  France faces the same demographic challenges as everyone else, and perhaps a full pension may only be payable after 45 years of work someday.  Do you think the unions would sign up for that deal?

France also has universal health insurance, with health spending far lower as a percent of GDP than in the U.S.  Which means far less in health services than U.S. public employees get.  Do you think the unions would sign up for that deal?

I would. 

Mar. 28 2012 03:31 PM

So, Larry, you would like to give back to your employer the portion of your total compensation your employer now pays in pension costs and increase your taxes to pay for your own pension.  Then, you would be in the same position as those public employees who now pay, in taxes, for their own pensions.  Most public employees contribute to their pension cost, just as private employees do.  The fact most often lost sight of is that the taxpayer is not providing a pension, gratis, to public employees.  The public employer, just as the private employer, pays for the total compensation (which includes pension cost) of their employees. 

I agree, the best solution would be to have employers and employees, public and private, to pay into a publicly managed retirement system.  In my opinion, the best solution would be to add a layer to the basic social security benefit, paid for by employers and employees, both public and private, and managed by the Social Security Trust Fund.

Mar. 28 2012 01:17 PM
Larry Littlefield

Excuse me?  Why should private sector employers have to pay for their employees to get pensions?  How much does Liu, as an employer, pay out of his own salary for his employees to have pensions?


Taxpayers pay for public employees to have pensions.  Private sector workers and businesses pay.  Why shouldn't taxpayers, including public employees, pay for private sector workers to have pensions?  That's the way it works in Europe.  Where everyone gets the same deal on retirement and health care.

Mar. 26 2012 10:18 PM

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