A guest editorial in the Philadelphia Inquirer defends HB2497—the pension deferral plan, by mischaracterizing its impact on the taxpayers and the economy.
One myth is that a defined-benefit plan saves taxpayer money because of administrative fees attached to regular 401(k) plans. This is a silly argument because defined-benefit plans also have highly-paid managers to administer the funds.
Secondly, the piece claims pension plans boost the state economy because they ensure retirement funds stay in local communities and invest in job-creation projects. Nonsense! Pension funds invest in stocks, mutual funds, and hedge funds; Pennsylvanians with a defined-contribution plan that they control can do exactly the same thing. That is, private 401(k) investments in mutual funds also help spur the economy and produce jobs. These myths are just scare tactics, trying to scare public employees that “Wall Street” and “Big Business” will steal their pension (I’m surprised the bogeyman of “foreign corporations” didn’t get thrown in there).
HB 2497 may reduce taxpayer contributions in the short-term, but what it really does is pass massive costs on to our children who will pay the obligations, plus interest, for decades to come. This bill is not pension reform, it is generational theft. And the only way to stop it is to adopt defined-contribution plans to remove politics from the public pension system.