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Defined benefit pension realities

October 18, 2010

The City of Winter Park, Florida has contractual defined benefit pension plans for both our police and fire employees. A recent study done for the city concluded that the “Unfunded Actuarial Accrued Liability” in these defined benefit plans as of October 2009 approached $17,000,000. The terminology is technical but the reality is not. All risks associated with investment returns needed to meet guaranteed pension payouts are born by the taxpayers of Winter Park.

The essential issue here is the guarantee that obligates future residents regardless of future economic reality.

There is every reason to offer public safety employees pension compensation that recognizes the risks they take for the public good.

There is, however, no justification for such compensation to obligate future residents to uncertain costs.

Nationally, we need to renegotiate pension and retirement health care packages for teachers, public safety employees, and all other public employees that fairly rewards their service while sharing appropriate risk with the citizens who fund this compensation.

Here are some defined benefit pension plan resources worth reading:

The Pew Center on the States – The Trillion Dollar Gap

Manhattan Institute – The False Obstacles to Pension Reform

Kellogg School of Management and NBER – The Crisis in Local Government Pensions in the United States

Wall Street Journal – Pension Gap Looms Larger – September 18, 2010

Wall Street Journal Editorial – The Cristie Example – September 20, 2020

Posted in Money.


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