Connecticut’s teachers may be better off with a 401(k) style, defined contribution retirement plan than under Connecticut’s massively underfunded pension system, according to some number crunching. Assuming a 6.5 percent employer match and adjusted for inflation, a defined contribution plan could yield similar retirement savings to that of the existing ...
States Struggle to Meet Pension Liabilities
Yesterday, the Pew Center on the States released a nationwide study of state pension funding shortfalls. The Center’s survey of the states found that 31 out of 50 states were below the 80 percent funded threshold in 2009–this is a sharp increase from the previous year when only 22 percent were below the advised threshold.
Connecticut’s pension program liability is over $41 million, with only 62 percent funded, making it the ninth lowest funded system in the country. Our state’s fund is still about $16 million in the red.
According to the Center, “the promises states have made for public employees’ retirement benefits and the money set aside to pay for them grew to at least $1.26 trillion in fiscal year 2009—a 26 percent increase in one year.” A spokesman for the Center remarked, “Given the size of the problem and the challenges of reform, there are no quick fixes. But there is considerable momentum for change.” And several states have made some modifications, such as reducing benefits to workers.
The Yankee Institute recognizes our current pension system is unsustainable, and we’ve recommended moving to a program of 401(k)-styled defined contribution accounts for state employees. View our recent report here.