Virginia State Del. William Howell (R-Fredericksburg) is calling for a committee to examine the state’s pension program and to consider possible reforms that would affect new hires.
One item on the table is a potential increase in the amount employees contribute to the state’s existing defined-contribution plan, modeled after 401k- and IRA-type plans commonly utilized in the private sector.
Attracting Young Workers
Howell says public pension reform would protect the interests of the next generation of public employees.
“If we want to attract the younger people coming in, I think we have to take a look at the kind of benefits that we are providing them and the kind of retirement plans they want,” Howell said. “I think most of the younger people coming along would appreciate a portable system, that if they stay at the state for six years and then move somewhere else, they can take it with them.
“But that is just what I think, so what we’re going to do is take a pretty exhaustive look at the demographics in Virginia’s workforce, the demographics in the state workforce, what can we do to cut back on that unfunded liability, and what can we do to make sure that what we have is sustainable,” Howell said. “I hope it will be a pretty thorough study over the course of a year.”
Building a Better Plan
Howell says he wants to encourage more state employees to move from defined-benefit plans to defined-contribution plans.
“[We] have 20 percent on a typical 401k [or] IRA sort of plan, and the other [80 percent] is on a traditional defined-benefit plan,” Howell said. “Personally, I would like to see that balance improved upon. I’d like to see more going into the defined-contribution part of the program, and less into the defined-benefit, because I think it’s relatively unstable.”
‘Still an Issue’
Bill Bergman, director of research at the national budget watchdog group Truth in Accounting, says Virginia’s public pension programs are in relatively good shape, but there’s still much room for improvement.
“Virginia itself looks to rank as a fairly responsible jurisdiction, historically, in funding those obligations, relative to the 50-state average,” Bergman said. “Virginia has been a good actor, relatively speaking, but ‘relatively speaking’ is relative to a very bad average, and it’s still an issue in Virginia and elsewhere.”
Taxpayers have to demand more accountability and honesty from lawmakers about the state of pension programs they are paying for, Bergman says.
“Historically, [taxpayers] haven’t been told the truth,” Bergman said. “Many state and city governments have been holding large debts off the balance sheet. We urge all citizens to take more interest in this arena, which is a difficult arena to really understand.”
Andrea Dillon ([email protected]) writes from Holly Springs, North Carolina.
Internet Info:
Truth In Accounting, “Virginia Unfunded Debt: What’s Virginia Hiding?”: http://www.statedatalab.org/state_data_and_comparisons/detail/virginia/
