Solution to Public Pension Liability?

One solution to the public pension liability problem that has been advocated by public pension gurus is to switch from a defined benefit plan to a defined contribution plan. A defined contribution plan is similar to a 401K or 403B plan where the contributions are defined, but, the benefits depend solely on the growth of the plan assets over the life of the individual plan contributor. The person contributing to the plan gets to select where the funds are invested, within some limits, and agrees to the retirement payout based on life expectancy at retirement and fund amount at retirement. In other words, the entire risk for the retirement is shifted to the retiree from the employer, in this case the city.

Perhaps it is time for the Georgetown City Council to consider transitioning city employees to a defined contribution plan so that the taxpayer is not responsible for any unfunded liability. There are methods for effecting such a transition. The Federal government transitioned from the long-standing civil service plan to a new Federal Employees Retirement(FERS) Plan in the mid 1980s. The existing enroll-es at the time continued in the civil service plan, while all new hires were enrolled in the FERS plan. The city could use a similar strategy.

The city should not wait to change plans until a crisis exists such as the one in Chicago, IL (http://city-journal.org/2015/eon0712ar.html). The proposed solution there is to issue long-term bonds to pay off short-term obligations. That is not a real solution to the growing pension liability problem, it is just kicking-the-can down the road.

Another solution advocated by progressives is to have the state take over local pension obligations. Again, not a real solution, just shifting the problem to another government entity.

Georgetown needs to begin to address the issue while it is still manageable. Ignoring the problem only allows it to grow into a crisis!