One politician’s view on Defined benefit Pension Plans in Pennsylvania. Rob McCord: “We Are Not a Society That Will Allow People to Eat Cat Food in Their Senior Years”

Posted on November 24, 2013 by Jon Geeting #@ Keystone Politics:

I’ll have a full write-up of the first Democratic Governor candidate forum on here a little later, but I wanted to get Rob McCord’s barnburner on defined-benefit pensions up on the Internet as soon as possible. Too many Democrats and left-of-center pundits are on board with the Republican plan to put new public employees into 401K-style defined-contribution plans, and I used to think this was a harmless idea too before I learned more about the looming retirement security crisis. The verdict is in: 401Ks are a disaster, and McCord is the first PA politician I’ve heard not just acknowledge this, but make an unapologetic case for public defined-benefit pensions. While the other candidates all agreed current public employees shouldn’t see their benefits cut, I didn’t hear anybody else make a commitment to keeping defined-benefit plans for future workers. McCord hit all the right notes here, and one of the biggest applause lines of the evening was his feminist argument for retirement security as a women’s issue. Enjoy:

Let me start with sort of a substantive point: if retirement security and pension security is a top, top-tier issue for you, I’m your guy. It’s arguable that nobody in Pennsylvania has spent more time studying this stuff, or working on pensions. There’s still tons to be done both in the public education pension and public employees pension. I’m a very very proud defender of the defined-benefit pension.

You actually should applaud yourselves because the number one defender of the defined benefit plan is the union movement.

What’s so great is that you care about working families and economic security, not just for members and your own union, but for everybody in America, and I salute you for that.

And not only is it easy for me to take the pledge and to defend your defined-benefit plans as opposed to attacking them, I’m proud of how often I’ve successfully fought back bad attacks from Tom Corbett. We will defend your pensions, not attack them, and we can do it efficiently.

I’ll make a couple quick points.

First, defined benefit plans are more efficient, not less efficient, than 401K plans. I’m a very proud business leader who loves being aligned with the union movement. I’ve helped to create jobs in the business world, and I get to jack up Republicans who have never created a job in the business world, and say “no, you do not know what you’re talking about.” The source on this data is the [Defined Contribution Institutional Investment Association]: they say it’s 1.7% less efficient per year to use a 401K plan, than a defined benefit plan.

So that means over 35 years, you get $2 back for every $1 that somebody who was using a 401K plan does. A lot of that money’s being shipped off to money managers in New York and Connecticut and so forth.

A woman named Teresa Ghilarducci who was at Notre Dame, a brilliant woman invented the approach that’s being studied in California [public-private pooling, and cash-balance pensions.] We need to embrace that approach because we need to care not just about public sector retirement plans, but private sector ones as well.

And guess what – it’s a “pay me now or pay me later” world. We are not a society that will allow people to eat cat food in their senior years. Raise your hand if you’ve met someone who says “oh I’m never going to retire, I’ll just work.” We know some of the people who’ve said that will not be able to afford to do that. They will be physically disabled, and we will have to pick up the tab.

So it’s a pay-as-you-go or save-in-advance world. We can imitate some of what we’ve done in the McCord Treasury with the 529 plan, we can take advantage of what Teresa Ghilarducci has done.

And let me tell you something: this is a women’s issue. Women are three times more likely to drop into poverty after the age of 60, and it’s primarily because they get underpaid when they’re working, and they take too much care of others, they take on other people’s medical emergencies. We owe the women in our lives a full and proud defense of pensions!

Original post can be found here....