The lessons of ???Halting a Runaway Train???

Tyson Eberhardt / October 25, 2011

This is the fourth in a series of blog posts introducing Fordham’s latest report, Halting a Runaway Train: Reforming Teacher Pensions for the 21st Century.

America’s public employee pensions are unsustainable. Left untouched, the spectacularly underfunded existing system may not only deprive workers of their retirement benefits, it could devastate the broader economy as organizations choose between defaulting on their promises or diverting enormous sums from other programs to pay for pensions. Yet while few question the seriousness of the situation, too few organizations have acted to fix it. Halting a Runaway Train: Reforming Teacher Pensions for the 21st Century not only profiles the groups that have led the way towards sustainable reform, its authors offer at least three lessons for workers, policymakers, and taxpayers.

• “First, this is messy, complicated work, fraught with challenges. Yet smart organizations can prepare for them.” By presenting the need for reform to employees using hard data and communicating with stakeholders throughout the process, organizations make pension overhauls smoother and more inclusive.
• “Second, cost savings from pension reform may be real but not immediate.” In the short-term, shifts away from defined-benefit (DB) plans mean new employees won’t subsidize the existing DB fund, increasing the burden on the organization to make up the difference. Conveying to all stakeholders, whether employees or taxpayers, the long-term savings from overhauling pensions is vital.
• “Third, employers need not choose between saving money and disregarding employee concerns.” While shifting risk from employer to employee is a necessary step in making pensions sustainable, employers can and should weigh the needs of workers in the process. Whether by reinvesting savings into other forms of compensation or offering retirement options that blend DB and direct-contribution (DC) models, employers can relieve financial pressure while ensuring a productive and stable workforce.

For further analysis of these lessons, and much more, download a copy of Halting a Runaway Train: Reforming Teacher Pensions for the 21st Century, and keep an eye out for upcoming responses and analysis of the report on Flypaper.

Category: Teachers