Defined contribution plans are 401k-type investment plans. The Arnold Plan is for the government to deposit retirement payments directly into an account that is owned and managed by the employee. With that, the state washes its hands of any further obligation to the employee’s individual retirement plan. A key element in the anti-pension movement is to convince the public that the cost of defined benefit pension plans are bankrupting cities and states. Their answer: privatization.
And who stands to benefit most with the least amount of risk? Investment firms stand to make billions managing those individual funds. And with the recent revelation of Wells Fargo Bank agents creating fraudulent accounts to make more cash for the company and themselves, it confirms that this type of retirement “insecurity” is not in the best interest of our teacher and ESP members who have dedicated their lives in service of America’s children!
The most likely form these bills will take is to force new hires into the defined contribution plan. Once this occurs, the contributions to the state retirement fund will begin to decrease. As fewer members remain in the state defined benefit plan, the under-funding will commence, followed by the eventuality of the fund being completely shut down. (What will the legislature do if, or when, this action occurs in Indiana? The legislature has used the teacher retirement fund through the years by borrowing from the fund with no intention of paying the fund back.)
This madness can happen here in Indiana! Think about it.The privatization foot is already wedged in the door. The Indiana Public Retirement System Board of Trustees voted to use a private vendor to administer the annuities savings plan that retired public employees can use for monthly benefit checks. And how about privatized toll roads and private school vouchers?
So what do we do? This action would certainly affect the new hires, but it can also deplete the funds available to pay current retirees. We must take action. NEA recommends the following list for action to protect retirement securities:
Actions You Can Take To Protect Your Retirement Security
Here is some more information from NEA, as you prepare to discuss this issue and lobby your position with your political representatives.
About Defined Benefit Plans
A defined benefit plan identifies the specific benefit that will be payable to you at retirement. Your basic retirement benefit usually is based on a formula that takes into account factors like the number of years a participant works for the employer (years of service) and the participant’s salary (e.g., average of highest three or five years of earnings). Your retirement benefit generally is provided in the form of regular payments over your lifetime beginning at what the plan designates normal retirement age, which is typically age 65. This stream of periodic payments generally is known as a pension or sometimes called an annuity.
About Defined Contribution Plans
A defined contribution plan specifies how much money will go into a retirement plan today. The amount typically is either a percentage of an employee’s salary or a specific dollar amount. Those funds often are invested in mutual funds or annuities available inside the retirement plan. The amount you have at retirement depends on how much (if anything) your employer contributes to the plan, how much you as the employee save in the plan, how long you leave those funds invested, and how well your investments perform inside the plan.
And who stands to benefit most with the least amount of risk? Investment firms stand to make billions managing those individual funds. And with the recent revelation of Wells Fargo Bank agents creating fraudulent accounts to make more cash for the company and themselves, it confirms that this type of retirement “insecurity” is not in the best interest of our teacher and ESP members who have dedicated their lives in service of America’s children!
The most likely form these bills will take is to force new hires into the defined contribution plan. Once this occurs, the contributions to the state retirement fund will begin to decrease. As fewer members remain in the state defined benefit plan, the under-funding will commence, followed by the eventuality of the fund being completely shut down. (What will the legislature do if, or when, this action occurs in Indiana? The legislature has used the teacher retirement fund through the years by borrowing from the fund with no intention of paying the fund back.)
This madness can happen here in Indiana! Think about it.The privatization foot is already wedged in the door. The Indiana Public Retirement System Board of Trustees voted to use a private vendor to administer the annuities savings plan that retired public employees can use for monthly benefit checks. And how about privatized toll roads and private school vouchers?
So what do we do? This action would certainly affect the new hires, but it can also deplete the funds available to pay current retirees. We must take action. NEA recommends the following list for action to protect retirement securities:
Actions You Can Take To Protect Your Retirement Security
- In coordination with your state and local Associations, let local, state, and federal elected officials know that you’re watching the decisions they make affecting your retirement security, and that you vote
- Become active in local and state benefits committees and be a resource and advocate for your colleagues, friends, and neighbors
- Understand that your financial future is at stake
- Coordinate with your state and local Associations to be kept up-to-date on important developments related to retirement benefits, and learn how you can advocate for these crucial benefits
- Join the NEA legislative action center
- Respond to calls to action from NEA and your state affiliate
- Get politically active
- Donate to and raise money for the NEA Fund for Children and Public Education.
Here is some more information from NEA, as you prepare to discuss this issue and lobby your position with your political representatives.
About Defined Benefit Plans
A defined benefit plan identifies the specific benefit that will be payable to you at retirement. Your basic retirement benefit usually is based on a formula that takes into account factors like the number of years a participant works for the employer (years of service) and the participant’s salary (e.g., average of highest three or five years of earnings). Your retirement benefit generally is provided in the form of regular payments over your lifetime beginning at what the plan designates normal retirement age, which is typically age 65. This stream of periodic payments generally is known as a pension or sometimes called an annuity.
About Defined Contribution Plans
A defined contribution plan specifies how much money will go into a retirement plan today. The amount typically is either a percentage of an employee’s salary or a specific dollar amount. Those funds often are invested in mutual funds or annuities available inside the retirement plan. The amount you have at retirement depends on how much (if anything) your employer contributes to the plan, how much you as the employee save in the plan, how long you leave those funds invested, and how well your investments perform inside the plan.
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