“The cash-balance plan… was a pension plan ‘masquerading as a defined contribution’ savings plan… ‘It’s [a] way to disguise the cutbacks in [public employees’] benefits’” (Ellen E. Schultz Retirement Heist, How Companies Plunder and Profit from the Nest Eggs of American Workers).
RESOLUTION 2006-04 - Supplemental Plans for State and Local Government Employees
WHEREAS, there is continued emphasis on increasing retirement savings nationwide, and state and local governments have been responsible partners in achieving this goal by covering the vast majority of state and local workers in public employee retirement systems that provide sound, secure benefits in retirement; and,
WHEREAS, many governmental entities sponsor a supplemental defined contribution plan in addition to the general retirement plan to allow participants to defer some portion of their salary in anticipation of retirement needs, and some states provide limited matching contributions to encourage supplemental plan participation; and,
WHEREAS, tax favored savings arrangements available to employees of state and local government are valuable in both increasing the attractiveness of public service as a career and encouraging public employees to play a proactive role in providing for their own future financial security; and,
WHEREAS, federal legislation has been enacted over the last decade to simplify participation in, and the administration of, these supplemental arrangements, much of which recognized that arrangements sponsored by governmental entities are unique from those sponsored by other entities; and
WHEREAS, efforts to simplify rules while keeping these unique characteristics under consideration are encouraged, such as: i) providing for similar tax treatment of employer contributions to governmental 401(k), 401(a), 403(b), and 457 plans by excluding such employer contributions from the Social Security and Medicare covered wage definition and the maximum amount that may be deferred under the plan for the taxable year for all such plans; and ii) allowing "Roth" features to be incorporated in all such salary reduction arrangements.
NOW, THEREFORE, BE IT RESOLVED that the National Association of State Retirement Administrators encourages federal policy makers and regulators to continue to recognize the distinctive characteristics of state and local governments and their supplemental retirement arrangements and keep these in mind when promulgating regulations or further legislative changes to these plans; and
BE IT FURTHER RESOLVED that the National Association of State Retirement Administrators supports legislation that encourages state and local governments to create and maintain supplemental retirement plans; and
BE IT FURTHER RESOLVED that the National Association of State Retirement Administrators does not support a one-size-fits-all approach to legislation that mandates the replacement of existing plans that may best meet the needs of individual governmental entities and their employees, nor legislation intended to supplant rather than supplement current retirement arrangements and could result in additional cost and complexity for State and local governments as well as plan participants.
For further reading:
The Hybrid Pension Plan as an Alternative to HB 5754 and Four Important Issues