(December 16, 2011) — Now is the time for a National Commission to address the decline of retirement security, asserts Thomas DiNapoli, the New York state comptroller and sole trustee of the $147 billion New York State Common Retirement Fund.
“The Commission must develop strategies to assure the continued viability of solid, well-funded defined benefit public pension plans and identify strategies to restore the finances of plans that have fallen into disrepair, DiNapoli stated in a wide-ranging discussion of the New York public pension system at the New School’s Schwartz Center for Economic Policy Analysis in New York City.
He continued: “Both in the ways government sponsors design and fund plans, it is critical to adhere to best practices. Guidance or mandates may need to come from federal action. On the investment side, there is much work to be done to ensure that pension fund trustees fulfill their fiduciary responsibilities. Best practices and federal law can help ensure that trustees pay careful attention to review of asset allocation, recoveries from litigation, and proper attention to the use of consultants and payment of commissions and fees.”
According to DiNapoli, the proposed Commission would focus on the longer-term problem of the erosion of retirement security. “We need to put a retirement system in place that allows the middle class to retire in dignity and forestalls the profound future costs on government and individual taxpayers of providing food, housing and other support to millions of Americans – living well into their nineties – who simply don’t have enough to support themselves,” he said.
Furthermore, the Comptroller proposed that the Commission also evaluate whether federal laws should be amended to encourage consortiums of smaller pension plans with the goal of achieving the economies of scale in benefits and investments. He concluded: “With the gridlock in Washington and the lack of resources, this type of federal intervention for pensions today is unlikely. However, at the very least, instead of joining the race to the bottom to dismantle pension systems, this is the time to preserve pension plans that are proven to work, help those that need fixing, and tackle the larger question of what can be done for those not covered by pensions.”
DiNapoli has also been vocal about defending defined benefit (DB) plans. Defined contribution plans, the comptroller said, are not adequate to replace defined benefit plans. “The reality is that 401(k)s were never intended to take the place of pensions,” DiNapoli said.
According to DiNapoli, recent market turbulence is a reminder of the “inherent instability of 401(k)s and how daunting it can be for individuals with 401(k)s to navigate their way to a secure retirement…If that’s not enough of a reason to be wary of moving from pensions to 401(k)s, according to the National Institute on Retirement Security, defined benefit plans cost 46% less than individual 401(k) style savings accounts”