Unions Must Answer for Pension Hypocrisy

Note: This commentary first appeared in the Bucks County Courier Times.

Would you believe the most vocal opponents to public pension reform—Pennsylvania’s largest government unions—have actually implemented the very kind of reform they are fighting against?

Shocking, but true: While calling 401(k)-type retirement plans for state workers “risky,” “inferior,” and “bad for both employees and taxpayers,” government unions offer this exact type of plan to their own employees.

Talk about hypocrisy.

For years, union leaders have lobbied against commonsense pension reform, bashing 401(k)s in House and Senate testimony and relentlessly urging their members and the public to oppose defined contribution and hybrid plans like Senate Bill 1.

But newly uncovered information shows the very unions opposing 401(k)s for state workers have been quietly offering the same 401(k)-type plans within their own organizations—many for decades, according to the U. S. Department of Labor.

At least seven government unions offer 401(k) plans to their staff, including the Pennsylvania State Education Association (PSEA); Service Employees International Union Local 668 (SEIU); United Food and Commercial Workers Local 1776 (UFCW); American Federation of State, County and Municipal Employees Council 13 (AFSCME); Philadelphia Federation of Teachers (PFT); PA AFL-CIO; and the Pennsylvania arm of the American Federation of Teachers (AFT-PA).

Two of these unions, PSEA and SEIU, also offer defined benefit plans, while staff members of AFSCME and AFL-CIO can participate in a defined benefit plan through the unions’ national affiliates.

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.

If you’re wondering why 401(k)-type plans are good enough for union employees but not for union members, you’re not alone. When it comes to standards, “double” comes to mind.

In fact, the PSEA’s magazine The Voice last year said 401(k)-style plans “spit in the face of research and experience … are more costly to administer, and provide far inferior benefits for most annuitants.”

Meanwhile, in testimony before state lawmakers earlier this year, AFT-PA President Ted Kirsch argued, “moving from a defined-benefit plan like PSERS and SERS to a defined-contribution plan (like a 401K) increases poverty among seniors.”

Either government union leaders are knowingly mistreating their own employees, or they understand that 401(k)-style plans are best for workers and employers—and are knowingly misleading the public.

Either way, they have some explaining to do.

The truth is, public employees would gain stability, portability, and protection from political manipulation through a 401(k) plan. Taxpayers, too, would benefit, as large defined contribution plans cost less to administer than the average public-sector defined benefit plan, according to research from the Manhattan Institute.

Nearly all private sector employers have made the conversion from defined benefit to defined contribution plans, and now we know Pennsylvania’s government unions have also embraced 401(k)-type plans for their own employees.

Apparently, when taxpayers foot the bill for defined benefit plans, union leaders are all for them. But when unions pay the bill themselves, suddenly 401(k)-style plans aren’t so bad after all.

As unions persist in their duplicity, public employees and taxpayers suffer.

Today, the commonwealth faces a $53 billion pension liability, whereas five years ago, when the legislature last took up pension reform, that number was $21 billion.

While unions have bucked reform, the unfunded liability for Pennsylvanians has spiked $32 billion—forcing property tax increases and diverting funds away from classroom instruction to pay rising pension costs. This debt is skyrocketing at a speed of about $11 million per day, further burdening our children and grandchildren and putting public employees’ retirements at risk.

Ironically, PSEA President Michael Crossey recently called the latest proposed pension compromise “the same old political games” that Pennsylvanians are “sick and tired of.”

In a way, Crossey is right.

Pennsylvanians are sick and tired of government union leaders’ political games that use taxpayers, teachers, and other public-sector employees as pawns to advance harmful policies. Their insulting “do as I say, not as I do” attitude should be a wake-up call to taxpayers and legislators alike.

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Matthew J. Brouillette is president and CEO of the Commonwealth Foundation (CommonwealthFoundation.org), Pennsylvania’s free market think tank.