Corbett, GOP should leave pensions alone
Gov. Corbett and the Republican legislators continue to bully teachers and the public-sector employees.
This time they are proposing changes to the public employees’ pension systems.
Corbett and these legislators would like all new employees to have a defined contribution 401K instead of the current defined benefits pension.
When I became a teacher, a defined benefits pension was part of my compensation package.
I have paid either 6.5 percent or 7.5 percent of my salary into the current pension system every pay, and I had no doubt my pension would be there when I retired, because this system has been around for more than 100 years.
In fact, I have my great-grandmother’s retirement letter from the state, dated 1932, explaining her defined benefits retirement package.
She had been teaching for 34 years in a one-room school house. Now, politicians are threatening to dismantle this system.
Pennsylvania’s State Education Retirement System has long been recognized as one of the best managed pension systems in the country.
Now, because the state quit paying into the pension system for more than 10 years, and it became underfunded, these anti-public education legislators maintain it needs to be changed to a 401K for new employees.
Even Republican legislator John McGinnis and many other Republican legislators who want to change the system admit it will cost the current taxpayers and employees twice as much in contributions to get the same benefits that current teachers’ defined benefits pension plans produce.
One reason it will cost so much:?the high fees mutual fund companies charge to maintain a 401K.
Jack Vogel, the founder of Vanguard, the largest mutual fund company in the country, stated a 2 percent annual fee imposed by a mutual fund company, will eat up 66 percent of the investment’s gain. That does not leave much to retire on, especially when the person investing assumes 100 percent of the risk and invests 100 percent of the capital.
In the 1970s, 42 percent of the workers’ employers sponsored defined benefits retirement plans.
Unfortunately, thanks to the lobbying efforts of the mutual fund industry and large corporations, a 401K is the only option many people have today.
If our legislators were truly looking out for their constituents, they would be working to put more people into defined benefit pension plans instead of forcing them into 401Ks.
It is time for the Republican legislators and Corbett to do the right thing and leave the defined pension system alone.
Then they could spend more time tackling important issues like funding public education and providing living wage jobs for everyone.