401ks unreliable pensions for private sector
By MARTY O’CONNOR The “news” media is replete with stories about how
public-employee pensions are too generous. It’s difficult to argue private-sector pensions are as good as public-sector pensions. They are not. How did we get here? What has changed? Let’s get a little perspective. If we look all the way back
into ancient times, say 1983, we will see New York state contributed 5 percent of its budget for pensions. As a percent of payroll, the state was paying 15.1
percent for the Employees Retirement System. Compare this to today’s rates of about 2 percent of the budget and 12 percent of payroll. Yet there was no hue and cry in 1983 we needed to create a new retirement tier, or the benefits were far too generous. Here’s what did change: In 1980, the law
creating 401k plans took effect and, by 1983, large private-sector firms were giving this new option a serious look. In 1984, 17,303 companies offered 401k plans to their employees. By the mid-1980s, around 8 million employees were participating in 401k plans and the assets stood around $100 billion. Flash forward to 2006, and there you find
438,000 employers participating in 401k plans with 70 million participants and more than $3 trillion in assets. So, now, most workers no longer have
defined-benefit pension plans. Their retirement plans are not about, “How many more years do I have to work and what is my final average salary?” It’s about, “How much can I put aside and what will the stock market do?”
On January 14, 2000, the stock market’s Dow Jones
Industrial Average reached 11,723. Since then, it’s been a roller coaster ride as we have gone from one bubble to another. As I am writing this, the Dow sits at 11,611. So, for the last 11 years our brothers and sisters in the private sector have realized virtually no gain in their retirement savings. Other than contributions, they are no nearer to retirement than they were 10 years ago. A study done recently by the Center for Retirement
Research at Boston College found a $6.6 trillion gap between the combined pension, Social Security and savings American households have today and what they need to maintain their standard of living. That’s a big hole. Now, if we were all
financial institutions we could expect a federal bailout, but as ordinary citizens we are on our own. Our sisters and brothers in the private
sector are angry and have every right to be. Unfortunately, they are focusing their anger on us. We did not take their pensions away, but we still have what they no longer do. Something needs to be done to get
private-sector workers real, guaranteed pensions. Some proposals are out there. Retirement USA, for instance, is pushing universal retirement coverage for all workers. This plan would supplement Social Security and would not replace existing plans that provide equally secure and adequate benefits. If you want to learn more, go online to
www.retirement-usa.org.
NEGOTIATIONS BEGIN — PEF’s PS&T contract team began formal negotiations with the state March
16.The team has prepared for negotiations since September, and has used the results of the contract survey in developing its
proposals.The team includes: (standing) BrianAlvarado,Michael Blue,DarleneWilliams, James Hassett, John Prince, Lorraine Simpkins, Karen Conte,Deborah Stayman,Tom Donahue,Todd Fryer; (seated) MaryTwitchell,Todd Kerner,Anna Schrom, Elizabeth Hough, PEF Director of Labor Relations and Chief Negotiator Robert Carrothers,ContractTeam Chair and PEFVice PresidentTom Comanzo andVice President Pat Baker.
— Photo by Deborah A. Miles Page 8—The Communicator April 2011 PEF Information Line: 1-800-553-2445
TRUTH BE TOLD
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