The leaders of New York city and state pension funds came out swinging last week against those who oppose defined benefit plans for public workers.
In separate presentations at the National Conference on Public Employee Retirement Systems' annual meeting in New York, comptrollers John Liu of New York City and Thomas DiNapoli of New York state explained why the DB plans they oversee should be maintained and strengthened.
“The traditional pension — also known as the defined benefit retirement plan — has been under attack in this country since at least 1980,” Mr. Liu said May 7. “But, as this audience is well aware, the traditional pension has managed to hang on in the public sector. We have to make sure this continues.”
Mr. Liu, who oversees the five pension funds in the $122 billion New York City Retirement Systems, is also a proponent of offering public defined benefit plans to private-sector workers.
Much of the attacks on public pension funds are about costs, Mr. Liu said. But research by the city comptroller's office, titled “A Better Bang for the Buck,” shows the DB model is more cost effective than the defined contribution model, Mr. Liu said.
Still, he said, there is room to improve costs by changing the management of the five DB plans. New York City's five funds are managed independently under Mr. Liu's oversight. The retirement system has been in place for about 70 years.
Mr. Liu, backed by New York City Mayor Michael Bloomberg, advocates an independent investment board composed of representatives of the mayor, comptroller and unions that would set pension strategy and hire managers for all five city pension funds. Additionally, the proposal calls for an independent Bureau of Asset Management headed by a chief investment officer who only answers to the investment board and not directly to any elected official.
Mr. Liu said the combined board and CIO proposal would lower costs of the five pension funds by $30 billion over 30 years without reducing benefits.
Mr. Liu also has proposed the New York City Personal Retirement Account, which would effectively extend the city's pension plans to private employers. The National Conference on Public Employee Retirement Systems is touting a similar concept called Secure Choice Pension.
Both proposals would pool employee and employer contributions into a professionally managed retirement fund that leverages economies of scale to lower costs for employers and offers portability to workers, Mr. Liu said.
“We believe ideas like this will go a long way to keeping everyone out of the rain when it comes time for retirement,” Mr. Liu concluded.