Public Employers are Dangerously Confused about Protecting Workers’ Pensions

Citizen Wealth Financial Justice Ideas and Issues

PensionsShreveport    Pensions at their core are deferred wages set aside for the future use of workers when they are unable to collect their salaries.  If there were no pensions, presumably wages would be higher, depending on tax policies of course.  Employers and politicians would never think they had the right to raid their workers’ money once it is securely in their pockets, depending on tax policies of course, but when it comes to pensions they seem not to hesitate for a moment at least if we look at recent examples of confusion run rampant in Detroit, the United Kingdom, and, sadly, some of the controversial, so-called “model” charter schools running unaccountably in New Orleans.

The situation in Detroit is now well known.  In the city’s bankruptcy officials and bondholders both high and low felt it was open season to reduce and eliminate pensions for career public servants, finally saved somewhat by the state government coming in and passing a measure to bailout most of the pensions.

In New Orleans, The Advocate spoke of a pension mess in the ReNew six-school charter operation perhaps too kindly as needing “clarity,” when the real demand should have been about the missing level of accountability when schools have no elected boards to oversee their financial shenanigans and think every dollar is fair game.  The rules for the Teacher Retirement System of Louisiana are clear:  all are in or all are out.  ReNew tried it all sorts of ways.  They tried to put one school in, keep the other six out, allow 21 teachers in out-schools in, and enroll 41 other school workers in that shouldn’t have been in.  This isn’t about clarity, it’s about chaos verging on criminality, because neither did ReNew pay the required Social Security payments on the workers.  The IRS and the state will have to straighten it out, but administrators clearly felt when it came to pensions way down the road, it was anything goes.

According to a columnist, Pauline Skypala, writing for the Financial Times, that about sums up what the Cameron government is trying in the United Kingdom as well, but not just for public employees but all of their workers.  She refers to it as “confusion,” but writes about the scheme as contradictions.  The government allowed pensioners to cash out of the system after they retired, which seems crazy and irresponsible, and on the other hand created something she refers to as a collective defined contribution (CDC) plan where everyone stays in, a defined contribution is made, and the benefits go up and down based on the security or volatility of the market-based investments.  Yikes!  Supposedly there is no “too low to go,” but when pensions mix politics, who really knows.  Supposedly, they are copying a similar system used in the Netherlands, but there everyone is in, the investments are mostly in not-for-profit huge pension funds, and long term trusted, “safe” holdings.

Since the devastation of the great recession in 2007, not even George W. Bush wants anyone to remember he once proposed converting the entire Social Security retirement system in the US to 401k plans that undoubtedly would have had a feeding frenzy on collateralized debt obligations and fancy products that no one understood based on algorithms from another planet, while leaving millions of seniors with nothing.

The only sure thing is that everyone gets old, and if they worked, and voted, to defer their earnings for a safe and secure retirement with the wolf far from their door, then politicians and employers need to make sure they view at least that commitment as a sacred trust.