Pennsylvania government unions rely on disproven myths to lobby against pension reform. Their actions, however, demonstrate they don't believe their own snake oil, and offer their employees' the same retirement plans they claim are bad for workers.
Union leaders repeatedly claim that “defined benefit plans cost less to administer” than defined contribution plans (like a 401k).This myth has been obliterated.
In practice, large defined contribution plans actually cost less to administer than the average public sector defined benefit plan, as highlighted in a new study by Josh McGee for the Manhattan Institute.
This should be no surprise to Gov. Tom Wolf, as he’s been complaining about the hundreds of millions of dollars our state pension plans pay in investment fees each year. McGee points out that fees for the Pennsylvania Public School Employees Retirement System (PSERS) are about triple the average cost of the largest defined contribution plans.
McGee's study also finds that investment return are similar for defined contribution plans, and that most defined contribution plans offer annuities—providing predictable annual payments during retirement.
Government union leaders deny these facts and disparage any reform to our broken pension system. But there’s a catch—those same unions offer a 401k style plan to their employees.
Our release today demonstrates union hypocrisy regarding pension reform. PSEA, SEIU, UFCW, AFSME, AFL-CIO, and the PFT all publicly oppose putting public employees into a 401k-style plan or a hybrid, yet they all offer a 401k or hybrid to union employees.
These hybrid models, which include both a defined contribution and a defined benefit component, are exactly what union leaders are lobbying against in both SB 1 and Gov. Wolf’s proposed “compromise.” Without fail, each of the seven union giants provides retirement plans similar to the ones they’ve called too “risky” for public employees.
The motto of union leadership is “do what I say, not what I do.”
|What Do Pennsylvania Government Unions Offer their Employees?|
|Government union leaders have opposed putting new state employees and school teachers into a “defined-contribution” plan (like a 401k) or a “hybrid plan” that includes part of a defined-contribution model, despite the fact nearly all the private sector has made this conversion.
However, major public sector union offer their employees a defined-contribution retirement plan or hybrid.
|Union||PSEA||SEIU||UFCW 1776||AFSCME 13||AFT-PA||AFL-CIO Pennsylvania||Philadelphia Federation of Teachers|
|Defined Contribution Plan Started||1997||1999||1985||1984||1972 & 2013||2014||1979 & 1997|
|Also has Defined-Benefit Plan?||Yes||Yes||??||Yes*||??||Yes*||??|
|* via national affiliate
Source: U.S. Department of Labor form 5500 searchable database https://www.efast.dol.gov/portal/app/disseminate?execution=e1s1