“A dip in the stock market can cause an immediate and unexpected need for an employer — in our case the government — to increase their contribution to the retirement fund,” [Supervisor Pat] Herrity said. “We all know there are only two ways to pay for [retirement funding shortages]: cut something else in the budget or raise taxes.”
Allowing easier forecasting for retirement payments, defined-contribution plans such as 401(k)s have become more popular with employers and governments in recent years. Montgomery County employs such a system.
“We’re not making the salaries we would be making in comparable private positions,” [Fairfax County Government Employees Union President Karen Conchar] said. “You’d end up with a less motivated staff if you went to a defined-contribution-type plan. It would not be good.”
Ms. Conchar is flatly wrong on all three points. First, nationwide, public employees make significantly more than the private workers who provide for their retirement.
The only possible explanation for Mrs. Conchar’s claim would be specific to Fairfax County, which is one of the largest and wealthiest places in the country, and likely an outlier to national data. Even given that, it’s strange to complain about living in an uber-prosperous area.
Second, can anyone explicate the perverse incentives that would explain her “less motivated” remark? 401(k)s force employees to take a responsible and accountable role in providing for their own retirement, without the risk that unions or legislatures will use pension plan trust funds as political slush funds. When are people more motivated: when they have incentives to act responsibly and care about something, or when they’re given unconditional promises?
Lastly, it would be a good move, saving Fairfax taxpayers money, and providing a more secure retirement for public servants. Everybody wins.