Three U.S. Senators; Richard Burr (R-NC), Tom Coburn (R-OK) and Saxby Chambliss (R-GA) recently introduced a bill, the Public-Private Employee Retirement Parity Act (S. 1678) to eliminate defined benefit plans for federal fire fighters and other government employees. Contrary to the bill’s name, the legislation would clearly do nothing to create parity among public and private retirement systems, forcing federal fire fighters to rely solely on their Thrift Savings Plan (TSP), an expensive and unpredictable 401(K)-style system.
Authors of the legislation argue that the government spends too much money on employee retirement. The fact is that the government spends roughly 1/10th of 1 percent of their budget on federal retirement each year, generated from both employer and employee contributions. This bill isn’t meant to inject parity into the system; it is meant to strip hard-working federal employees of a secure retirement. Americans overwhelmingly support providing public workers with balanced defined contribution plans that provide a modest and guaranteed retirement benefit. A recent poll conducted by the Pew Center on the States revealed that Americans support public employees (fire fighters scored a 92% favorability rating), support defined benefit plans for public workers over more traditional 401(K)-style plans and believe that guaranteed plans are at the right benefit amount or too small.
This legislation is one attempt in a series of bills perpetrated by individuals utterly opposed to the idea of defined contribution retirement plans. While they may hide behind a cost argument, they aren’t fooling anyone. As the economy recovers, defined benefit plans will continue to gain strength and will still be the safest and most cost-effective way to provide guaranteed retirement to all public employees.