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Saturday, December 23, 2017
"The traditional pension seems destined to be an artifact of U.S. labor history"-The Washington Post
“…The notion of pensions — and the idea that companies should set aside money for retirees — didn’t last long. They really caught on in the mid-20th century, but today, except among government employers, the traditional pension seems destined to be an artifact of U.S. labor history.
“The first ones offered by a private company were those handed out by American Express, back when it was a stagecoach delivery service. That was in 1875. The idea didn’t exactly spread like wildfire, but under union pressure in the middle of the last century, many companies adopted a plan.
“By the 1980s, the trend had profoundly reshaped retirement for Americans, with a large majority of full-time workers at medium and large companies getting traditional pension coverage, according to Bureau of Labor Statistics data.
“Then corporate America changed: Union membership waned. Executive boards, under pressure from financial raiders, focused more intently on maximizing stock prices. And Americans lived longer, making a pension much more expensive to provide.
“In 1950, a 65-year-old man could be expected to reach age 78, on average. Today, that 65-year-old is expected to live beyond 84. The extended life expectancy means pension plans must pay out substantially longer than they once did.
“In place of pensions, companies and investment advisers urge employees to open retirement accounts. The basic idea is workers will manage their own retirement funds, sometimes with a little help from their employers, sometimes not.
“Once they reach retirement age, those accounts are supposed to supplement whatever Social Security might pay. (Today, Social Security provides only enough for a bare-bones budget, about $14,000 a year on average.)
From “I hope I can quit working in a few years”: A preview of the U.S. without pensions by Peter Whoriskey
What Defined-Benefit Pension Plans Contribute to a State's Economy:
·Defined-benefit pension plans have an economic impact of several hundred billion dollars each year and support several million American workers in their jobs; they contribute over a hundred billion dollars to annual local, state, and federal revenue, while reducing government expenditures; they also provide capital to the financial markets, and they deliver the same level of retirement income as an individual 401(k) type savings account at half the cost as a result of their professional asset management and better long-term investment strategies, particularly during challenging economic times(The National Institute on Retirement Security, NIRS).
·Defined-benefit pension plans are associated with far fewer American households that experience food privation, shelter adversity, and health care hardship and provide a bastion of hope and financial stability for millions of people in this country (NIRS). Instead of attempting to eliminate defined-benefit pension plans, they should be advocated by everyone.
·It is also true that state-funded pension plans are less expensive for Illinois taxpayers than Social Security and that Illinois taxpayers save hundreds of millions of dollars per year by not paying Social Security payroll taxes for 78% of all active employees in the five-State-managed plans.
·Defined-benefit pension plans have an economic impact of over $4 billion in the State of Illinois; their effect on Gross Domestic Product creates $2.38 billion; jobs created as a result of their existence: 30,448 (TRS, 2012).
·Defined-benefit pension plans contribute over $100 billion to annual local, state, and federal revenue in the U.S. and provide capital to financial markets (NIRS, 2012).