Proposed pension framework breaks promise to teachers
By Tim Abrams, Executive Director of the Kentucky Retired Teachers Association.
Let’s remember how we got into this pension mess in the first place.
Frankfort — not our current and retired teachers — failed to live up to its fiduciary responsibility to properly fund the Teachers’ Retirement System (TRS).
Now, after nine years of insufficient funding and the loss of interest on those funds, Frankfort politicians want retired and current teachers to bail them out of the debt they owe.
Our retired teachers are God-fearing, down-to-earth Kentuckians who dedicated their lives to educating our youth. They didn’t earn a big paycheck, and they certainly don’t have access to large amounts of money in retirement. They don’t have billionaires or outside groups forming “dark money” PACs to support pension reform. They don’t have influential lobbying firms in Frankfort trying to convince legislators to adopt a 401(K)-style retirement system that will benefit Wall Street.
What teachers do have is years of service to our state and contributions from every paycheck into TRS with the expectation they will receive the retirement benefits they were promised.
Here is how the framework breaks the promise.
Kentucky’s 52,000 retired teachers — many of whom voted for the Gov. Matt Bevin because of his devotion to his fairness and faith — receive an average retirement benefit of $37,000 per year. This is only $11,000 higher than the poverty level for a four-member household established by the U.S. Census Bureau.
Gov. Bevin’s proposal for a five-year freeze in cost-of-living adjustments (COLA) for all current and future teachers amounts to nearly a 7.5-percent reduction in these benefits. Under this proposed COLA freeze, a 60-year-old teacher making $3,000 a month would lose roughly $71,000 over his or her lifetime. Younger teachers would lose substantially more. Given these modest retirement benefit levels and rising health care costs, this proposed framework would be financially devastating to retired teachers.
The governor also has proposed that all new teachers must participate in a 401(K) defined-contribution plan rather than TRS, which is a defined-benefit plan.
States that have implemented similar 401(K)-style plans, such as West Virginia, Michigan, and Alaska, all saw dramatic increases in their unfunded pension liabilities because of a lack of contributions to the old fund from new members. Case studies from across the U.S. show switching to a defined-contribution plan does not solve the under-funded pension issue and will drive teachers to other states or out of the profession completely. Frankfort is trying to mitigate this funding issue by promising state contributions going forward. Where have we heard this before?
As retired teachers, we are skeptical of this promise — particularly after suffering through nine years of broken promises to properly fund TRS. For us, particularly our retired math teachers, this just doesn’t add up.
We appreciate Bevin’s and the legislature’s focus on this complex pension issue. But the framework proposed is the wrong solution. We implore him to look at the successes and failures of other states to come up with a solution that is fair to teachers and taxpayers.
Crafting a solution behind closed doors and listening to the interests of big money outsiders won’t solve this problem. It only will break the promise to Kentucky’s retired teachers.