Monday, February 28, 2011
Today a room-for-debate blog on public-sector pensions covers much relevant ground. The management costs and fees associated with 401(k) style investment funds are not insignificant, but traditional defined benefit pension plans require growth in the "tax base" associated with funding them. For plans funded solely by contributions (thus far, Social Security is an example), that ends up being total payroll. I can't imagine there are many states and localities that have been expanding their base of public employees much over the past several decades or into the future. No wonder these plans are massively underfunded.