News Column

EDITORIAL: Small pension reform draws big rhetoric from Oklahoma House member

May 30, 2014

The Oklahoman, Oklahoma City



May 30--WE'RE accustomed to Oklahoma House Minority Leader Scott Inman putting his foot in his mouth. With the issue of public pension restructuring, Inman has inserted not just a foot but an entire yardstick.

Inman, D-Del City, said a switch from a defined benefit structure to a defined contribution system was the worst piece of legislation passed in the 2014 session. That's saying a lot, given the spate of bad bills that made it to the finish line.

The change affects only new hires and only one of the state's public pension plans, which happens to be the one that's in the best shape. Inman told the Tulsa World that the change will provide less incentive for people to work in state government and will result in future state workers retiring into poverty.

Really?

The change involves a switch to a 401(k) model in which employees and employers contribute toward a tax-deferred retirement savings plan. More than 50 million American workers have a 401(k) plan. That's a lot of future retirees selling pencils to raise money for food.

Oh but don't those workers also have pension plans? Most don't. The percentage of workers covered by a traditional defined benefit plan has been steadily declining. Only about a fifth of American workers are covered by such a plan.

Some workers have both a traditional pension and a 401(k), but the traditional pension model has been unsustainable in the private sector and a factor in the bankruptcy of local governments across the country. Simply put, unsustainable defined benefit retirement plans pose far more of a threat to the wellbeing of future retirees than do defined contribution plans.

Inman's Republican counterparts will continue their efforts to switch more public employees to the 401(k) model, but it will take decades for the change to bring more solvency to public pension plans.

What really galls Inman and other Democrats is that 401(k) plans put more responsibility in the hands of the account holders (employees). The same arguments Inman's been making were heard in Washington when efforts to reform the Social Security system were tried.

The underlying assumption is that public employees aren't smart enough to make sound fiscal decisions. Big Brother must do it for them. That's an insult to their intelligence, but the argument is yet another chapter in the Democratic Party's class warfare playbook.

Unfunded liabilities can sink pension plans. Funding pension plans can sink governments. In the private sector, employers realized long ago that the defined benefit model was paternalistic and unsustainable. Gradually, responsible government leaders have come to the same conclusion.

Political reality dictates that state government here will embrace the defined contribution model at a very slow pace. But a start has been made. This first step involves only one foot, but a yard's worth of progress has been made in breaking the defined benefit chokehold.

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Source: Daily Oklahoman (Oklahoma City)