Public Pensions, Politics and Risk Management
According to "Florida governor wants cheaper state pensions" by Michael Connor (Reuters, February 1, 2011), Governor Rick Scott wants to put public employees into 401(k) plans and migrate away from traditional defined benefit plans. Though the state's system is "relatively strong financially," the article goes on to say that local town halls "pay between 9 and 20 percent of each worker's salary for pensions" and that "Florida's 572,000 state and local-government workers now see no paycheck deductions for a fixed-benefit pension program, which supports 319,000 retirees."
Expect more to come after Governor Scott puts his budget to the Florida taxpayers on Monday, February 7, 2011.
Notably, risk management is not any less important for defined contribution plans. To the contrary, a quick survey of some of the litigation underway is focused on 401(k) issues relating to fees, portfolio selection choices, investor education and much more. Moreover, greater pressures for reform are going to force enhanced transparency and allow little time and latitude for decision-makers to focus on prudently realizing risk-adjusted returns. The last thing a board member, lawmaker, regulator or politician wants to address is a worsening retirement IOU situation when taxpayers, shareholders, employees and other stakeholders are grumpy and impatient.
If you did not get to read it when originally published, click to download "Pension Risk Management: Necessary and Desirable" by Susan Mangiero, PhD, CFA, FRM, Journal of Compensation and Benefits, March/April 2006.
Editor's Note: Fiduciary Leadership, LLC is the new name for BVA, LLC.
