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posted: 2/6/2013 4:40 AM

The reality of public pension plans

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The reality of public pension plans

Proponents of "defined contribution systems" of retirement plans do not know the realities of most Illinois public pension plans. When private businesses switched from "defined benefit" plans which guarantee retirees a certain income to "defined contribution" plans which require investments in 401(k) type systems, their employees were also part of the federally mandated Social Security System, a defined benefit system.

Most Illinois public employees are not, nor were they ever given that option. Indeed, teachers, for example, who worked for private industry and switched careers to work for a public school are not able to access the entire Social Security benefits that they earned while working for private industry, nor are they eligible for their spouse's SS death benefits. In the public definition of benefits, that was considered "double dipping."

A federal law dictates that alternate pension or retirement systems must provide that their employees get at least the amount they would have under Social Security. Defined contribution plans depend on the whims of the stock market, and therefore cannot guarantee anything. Indeed, statistics indicate that the average retiree has about $40,000 in their 401(k)s total (not per year), far less than anyone could live the rest of their life on.

Defined contribution plans help only the employer, not the employee, and, in private industry, have been part of the move to provide the employee with the smallest possible salaries and benefits in order to improve the company's profits to their shareholders and upper management.

I do not understand why anyone would look to private industry as the example of good practices. But if we are looking to them for expertise, we should at least expect them to have done the research and be speaking from a base of real knowledge instead of espousing their personal biases.

Linda Dickey


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