Curmudgeon's Corner

Pension Envy

Posted by Al Campbell on Feb. 7, 2013

U.S., Political, Quality of Life, Taxes, Wisconsin

I am trying to remember the last time I worked someplace where there was a true pension benefit as part of the overall compensation package.  That has to go back twenty-five or more years ago.  I was actually in the field of pension plan development and watched as that field was overtaken by changes in pension funding arrangements and by profit sharing plan proliferation.

I saw the phrase “pension envy” in an e-mail blast this morning, and that seemed to sum up the private sector versus much of the public sector quite well.  The Post Office service cutback is among the latest news items where pension plan funding is noted as a significant part of the cost issue in that system.  Public sector employees have, by in large, pension plans continuing.  True, there is now more funding of those plans contributed by the individual where the plans were essentially 100% employer-funded in the past.

We see the Milwaukee County situation where individuals have received more than a million dollars in addition to their fully funded pension benefit, and it is quite easy to see where there might be some “pension envy”.  We are told that those in the public sector took lesser amounts of immediate compensation in return for the better benefits packages.  That may have been the case initially but over time the immediate compensation values grew while the pension funding increased to support the higher retirement benefits that were accruing given wage and salary increases.

I am frankly very happy for those who are able to retire with a pension benefit and do not begrudge them that benefit.  In many cases, I’m sure, those people stayed in positions they would’ve wished they could leave because of those ‘golden handcuffs’.  By the same token, there is nothing that says that new hires cannot be accorded different benefit packages so that, over time, the fully funded pension plans will have gone the way of many other things in our world.  There are good programs available where the employers continue to help fund retirement benefits, but where the employee also participates in that funding.

I cannot find a rational reason for this differentiation to not be employed across all governmental units.  It can be added to negotiations incrementally and it can be tailored to apply primarily to those newly hired into these public sector positions.  All citizens are involved in the necessary reduction of government costs starting at the national level, and coming all the way done to the local level.  That is reality.  For any governmental agency to not have begun such a transition does not seem sensible to me.