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Tier 6 is not in the Interest of New Yorkers

February 10, 2012
By Danny Donohue

It’s no surprise the demand for a new pension tier for public employees in New York might be politically popular with some people.  There’s been a lot of misrepresentation about what’s really at issue. In the heated exchanges, let’s not forget the importance of retirement security for individuals and our society.

Contrary to popular belief, the average pension for a public employee in the state and local government retirement system is about $19,000 a year – for CSEA-represented employees, it’s around $14,000 annually. That means an individual who may have worked 30 years or more is looking at around $1,500 a month or less from their pension.

Even at these modest levels, most public employee pensioners continue to live in New York, pay taxes, spend their pensions and contribute in their communities.  It’s a good thing for us all.

Much of the carping about pension obligations misses the truth that they are not the result of excessive benefits, they are the fallout from Wall Street greed and resulting reforms requiring minimum payments in good times and bad. As a result, unlike many other states, New York’s pension system is strong and stable.

What’s not good for most New Yorkers is Governor Andrew Cuomo’s proposal for a new pension Tier  6 with a 401K style “option”.  Simply put, it will provide no immediate budget relief and means people will have to work longer, pay more and receive drastically less benefit.

Tier 5 was only enacted two years ago with reduced benefits and a number of reforms. It will be years before it produces its promised $35 billion in savings.

Tier 6 promises greater savings but at what cost?  Its radical redesign means those savings will come at the expense of working people while weakening the existing fund.  Whether we’re talking about current or future employees, the proposed Tier 6 provisions would further erode our middle class.

The Tier 6 proposal is particularly sinister because the punitive parameters of the redesigned traditional pension model would likely drive many employees to take their chances with the 401K-style option, even though it provides no guarantees and puts all the risk on the employee. We have already seen in recent years the damage to retirement security when it is exclusively tied up in 401K plans – it’s hard to imagine why politicians would be advocating that kind of insecurity as a public policy objective.

We hear radical reform is necessary for public sector pensions because it’s now the private sector norm. What rot. Copying the worst behavior of private companies that have drained their pension funds, destroyed their employees’ futures, contributed to the most unequal distribution of wealth since before the New Deal, and abandoned working people and communities, should not be the aim of government. Tier 6 would be harmful now and forever.

Danny Donohue is president of the nearly 300,000 member CSEA – New York’s leading union.

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