Perhaps out of fiscal desperation, or perhaps a sprouting of common sense — likely a convergence of both — this year’s Legislature is considering several proposals that could go a long way toward making the state budget more sustainable.One in particular caught our attention this week. It’s based on a simple question: Why not convert state workers from a defined-benefit pension system to a defined-contribution retirement program? The answer, though, is far from simple, but it is worth pondering.
The current system is as complicated as it is extravagant. The state has the Public Employees’ Retirement System (PERS), plus the Teachers’ Retirement System (TRS), plus the School Employees Retirement System (SERS), plus the Public Safety Employees Retirement System (PSERS), plus the Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF). We wonder if a large box of Alpha-Bits contains enough letters to accommodate such a dizzying array, and beyond the alphabet soup there’s also Plan I, Plan 2 and Plan 3.
Whether all that can be condensed into a tighter package is doubtful; negotiators don’t seem eager to coax state worker unions toward consolidation. But gradually converting from defined benefits to defined contributions should be pursued. Already in the private sector, 401(k)s and other similar plans specify contributions made by workers and businesses. They establish a reasonably reliable but still risky retirement plan based on shared investments, not on guaranteed payouts. Multiple options include lump-sum checks and long-term payments.
Such a conversion, though, would have to be gradual. Senate Bill 6378 — which includes state Sen. Joe Zarelli, R-Ridgefield, among its sponsors — would move the state in that direction. As Zarelli pointed out in an email to The Columbian, the bill “begins the transition away from a defined-benefit model by ensuring all new employees are placed in a hybrid system, more akin to the private sector.”