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Dayton
Daily News...
5 important questions
about pension reform
Tuesday, March 8, 2011
Q: What is driving the demand for reform?
A: Changes are needed to ensure the long-term financial solvency of the
public pension system covering 1.5 million active and inactive members,
retirees and their dependents. Three of Ohio’s five public pension
systems are not in compliance with a state mandate that they be fully
funded within a 30-year window. Retirees are living longer and health
care costs are rising. Investment income was hit hard by the 2008
market crash. Some reform advocates say the taxpayer contribution to
the funds is too high, benefits are too generous and public employees
can retire too early.
Q: How do public pensions differ from private-sector pensions?
A: The private sector has shifted away from traditional pensions
offering defined benefits that cost the employee little, and toward
defined contribution plans, such as the 401(k), which require an
employee contribution and have no guaranteed benefit at retirement.
Private-sector employees also receive Social Security benefits, while
public employees typically do not unless they have paid taxes into the
system.
Q: How do the public pension systems impact taxpayers?
A: Public employers must pay a share of the pension contribution, at an
annual cost to taxpayers of $4.2 billion. Employees pay $2.97 billion
annually. Much of the pension funds’ costs are covered by returns on
investments that the funds make using contributions. The cost of a
member’s benefit outstrips contributions to the fund within a few years
of retirement.
Q: What do public employees say about demands for reform?
A: Worker advocates say it makes sense to increase the minimum
retirement age and some even support raising the employee contribution
if that helps the pension funds remain solvent. But they say pensions
are a promised benefit that make public service more attractive and
should not be substantially changed.
Q. How do the public pensions systems impact the economy?
A: The funds say they annually pay $12 billion in pension and health
care benefits and invest
$160 billion in fund assets.
Read it at the Dayton Daily News
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