Proposal would reduce pension costs and could save New York taxpayers $113 billion over 30 years
In his testimony on the proposed 2012-2013 New York State Budget, Bill Mooney, president of the Westchester County Association, urged legislators to pass a “sixth tier” in the public retirement system for new workers, as proposed by Governor Cuomo. To do so could potentially save the state $113 billion. And with savings like that….
… New York could turn attention to economic development and become competitive once again. “We must create an environment that doesn’t result in our state being consistently ranked 49th out of 50th in terms of having a ‘business friendly’ environment,” he said. Mooney testified at the Legislative Budget Hearing conducted by Assemblyman Robert J. Castelli at the Bedford Town Hall on March 9.
Tier VI calls for employees to make larger contributions into the system, higher minimum retirement ages, and a prohibition on using overtime and severance pay to add to their benefits.
“What has gotten lost in the rhetoric of the moment is that Tier VI as proposed is not only fair to taxpayers, it is fair to future workers,” he said. “New employees would be given a choice between a defined benefit plan and a defined contribution plan.”
Defined contribution is a retirement model that allows workers to set up personal investment accounts backed by employer contributions. Defined benefit plans, on the other hand, are no longer sustainable under the current economic conditions. In the defined benefit plan model, an employer commits to paying its employee a specific benefit for life beginning at his or her retirement. The amount of the benefit is usually based on factors such as age, earnings, and years of service.
“In the quest to attract young, mobile workers, [a defined contribution] is certainly a more desired option. The SUNY and CUNY system seems to have figured this out as their 30,000 employees have had this option since the 1960’s. And approximately 70% of their employees have opted for the defined contribution. Their plan could certainly serve as a model….As you work to advance your budget plans, please know that Tier VI should be passed and it must include a defined contribution option.”
It would be nice to show taxpayers that it’s not just “business as usual” in Albany.