The full details of Bevin’s pension plan have been released, and Matt breaks down what that means for Kentucky’s teachers and public workers.

4 COMMENTS

  1. Matt, thanks for the commentary on the pension bill and for trying to shed some light on this tough situation. Importantly there are a couple things that need to be clarified about any pension and 401-k. A pension system is not inherently “better” than a 401-k. However it is definitely better when the benefit package is to high and the provider assumes all of the risk (plan stated return – market return). Anyone would want a pension, or any asset, when its “promised” value (I’ll get back to that word later) is greater than can be provided in the real world. Your comment that a 401-K does not make that much money is not a fair assessment. They make what the market allows, and are the same vehicle that most working Americans have today. A pension is only better when its benefit package is over-estimated. A pension plan is exactly what the name entails. It just a plan or a “scheme” to provide for retirement. The math only works when the assumptions for asset growth are correct, contributions are paid, and the ratio of workers to retirees is rising. Currently the Commonwealth finds itself in a situation where NONE of these three inputs are met, and the plan has not addressed the overestimation in real time, thus compounding the problem. Furthermore, I abhor the word “promise” that is being used too often by plan participants. There is not a financial institution in the country that can use this word and there are no guarantees when it comes to finance. Ayone in the financial industry that uses the word promise would be fined, jailed, or both. The “promises” that keep getting referred to are really “lies” told to participants by past legislature to earn their vote. It is the worst part of our political system – namely a politician making short term decisions that have long term consequences that he/she will never have to address.
    Finally, the real fix for this would slash current and future obligations to plan participants, an action that Governor Bevin refused to take. He should be getting credit for this, but most people cant get past this “promise” issue. Are future generations of Kentuckians supposed to pay for the mistakes of past legislature by themselves and keep the plan as it is, or should there be some compromise on all parts? Either way the future of the Commonwealth resides on this issue. Without a fix, no company (jobs) will ever move here for fear of being taxed to death to fix this problem. As a result, the population as we know it will be in decline for the next 25 years. That , I can guarantee.

    • Most working Americans do participate in a 401k type plan, but also will receive Social Security. Teachers don’t have that as a backup!

  2. An Excellent commentary really distils the fine points and brings into to light two VERY serious shortcomings of this bill. No guaranteed sick days & no guarantee to the terms of this bill by the legislature.

  3. All they have to do is to add 1% to the Sales Tax and this problem will be fixed. This is a “public problem” since the “public” elected the people who caused this. You cannot rob Peter to pay Paul. The addition to the
    Sales Tax is the only way to fix this. The system is already in place. It is time these legislators get enought guts, set the politics aside, and increase the Sales Tax. If this is not fixed immediately, I hope everyone of them are voted out-of-office (those who has been there for at least 10 years) and, I would guess, it would be fixed then.

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