Employees Need to be Involved in Pension Changes

ANCHORAGE, ALASKA—While states across the country have made changes to their public employee retirement plans, some of them have ended up in court for one key reason.
“There’s a theme that comes where reform efforts have worked and where they don’t and a lot of them end up getting them challenged in court,” Robert D. Klausner, a partner with a law firm that handles retirement system cases, said during the CSG policy academy, “Accounting for the State of Public Pensions,” Saturday, Aug. 9. “The places where it doesn’t get challenged in court are places where employees have been engaged early in the process.”
Early engagement with public sector workers is important for many reasons, he said.
“It’s a lot better for morale in the workplace and cost of government if people can agree on these things,” said Klausner.
Kelly Fox, president of the Washington State Council of Fire Fighters, agrees. He’s a big proponent of defined benefit plans and believes the pension system in Washington offers proof that those plans work and are sustainable.
“You can build a plan that’s sustainable as a defined benefit plan,” he said. “The difficulty I’ve noticed around this country is that when they start off, the benefits are a little too rich and it’s hard to back off the benefits of it.”
But state and local governments working with public sector employees can make any necessary changes, Fox said.
“I think with the defined benefit plans, we can make some modest changes,” he said, “but it’s going to take getting our people to the table.”
Many times, Fox said, legislatures go through a process to make changes to pension systems, then decide to engage stakeholders after much discussion has taken place.
“I think that’s step number one,” he said.
While it’s difficult for employees to give up benefits, Klausner said, “I think the light is starting to go on.”
He said employees are starting to realize if governments don’t address the costs of pensions, they’re going to see very few pay raises.
“If we don’t rein in the costs here, it’s going to hurt you somewhere else,” he said of public employees. “There is a limit on money available for personnel costs.”
Klausner also believes state governments should educate employees about the pension situation and the need for changes, “and I think it has to start day one.”
Otherwise, he said, public employees may challenge pension changes down the road.