Pension burden shifting from employers to workers

Football fans rejoiced last week when the National Football League’s professional referees returned to the field. However, they probably didn’t notice the details of the labor agreement the ended the lockout, which put the referees in the unfortunate position of not only making calls on touchdowns and pass interference, but also of becoming their own retirement actuaries.

The referees are part of a disturbing trend across the country in which workers are being forced to give up their defined-benefit pensions in return for riskier investments that may not pan out and provide for them in their retirement. For referees, new hires will be set up with a 401(k) rather than a pension, and after 2016, all union members will transferred over. For California state public employees, the drastic pension reform package recently signed by Governor Brown requires teachers, police officers, trash collectors, and others to pay a full half of the costs of their pension benefits.

These moves are part of a larger shift toward placing more responsibility over retirement investments onto the shoulders of rank-and-file workers, rather than on employers. That’s worrisome because it requires average working families to become expert investors in order to secure their retirements. By way of comparison, the California Public Employees Retirement System earned and average of 7.7 percent annually over each of the past ten years. How many families who put money in the stock market or in real estate over the same time period fared as well?

Yes, pension “reform” needs to take place. For example, abuses of the state’s retirement system need to be stopped, and loopholes that allow for an employee to artificially spike their pension so their payout is larger than their highest salary need to be closed. The 64,000 members of the public safety community represented by the Peace Officers Research Association of California would be the first to express that opinion and call for changes. However, we believe the changes should take place at the bargaining table, where our members have already agreed to higher contributions and forgone pay raises.

In addition to slowly shifting more financial burden onto rank and file peace officers, the Governor’s reform plan nonsensically increases the retirement age for public safety workers to 57 years old. The notion that those of us who don a badge and gun ought to work a beat until nearly 60 years of age is just plain wrong. Requiring that we do so will immediately hurt our ability to recruit new officers to protect the streets of our communities.

These extreme changes are being made in the name of budget savings, but it is unfair and wrong to blame average working families for pension funding issues or governments’ budget deficits. The average public worker retires with a modest pension of just $26,000 — and most PORAC members do not earn Social Security. What’s more, the entire state employees retirement fund represents a very small fraction of expenditures by the state each year; even if the system was eliminated entirely, the state would still grapple with multi-billion-dollar shortfalls.

It’s also misleading to cite a handful of egregious examples of six-figure pensions as an indication of a broken retirement system. Excessively large public pensions, which were all agree are a problem that needs to be addressed, account for less than 2 percent of all pension payouts. The great majority of California’s 2 million public sector workers will never earn anywhere near six figures.

Almost every element of the pension plan announced last month by the Governor and legislative leaders goes well over the top. The plan attacks average working families, undercuts collective bargaining, contains cuts without true reform, and forces public safety workers to far beyond what is a reasonable age for such jobs.

California public employees and NFL referees are both getting caught up in the same frenzy over pension costs. Soon, it will become clear placing increased burden on workers through harsh reforms is the wrong call.
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Ed’s Note: Ron Cottingham is president of the Peace Officers Research Association of California