July 26, 2012
Baltimore Sun
Letter to the Editor
The Sun's recent editorial on public pensions ("Prudence and public pensions," July 20) misses the mark in several respects.
Readers should be forewarned that The Sun's proposed solution — a switch to defined contribution plans — is a recipe for increased costs and decreased retirement security. Walking away from the fiscal efficiencies of defined benefit plans and closing one plan while opening another serve to drive up the state's costs. Moreover, moving to a defined contribution plan typically leads to a drastically decreased benefit and an increased reliance on social services by retirees, again driving up state costs.
States pursuing this swap have quickly come to wish that they'd done their homework beforehand. West Virginia froze its pension plan to move to a defined contribution plan only to encounter these very problems. The negative repercussions were so endemic that West Virginia decided to return to its pension plan.
So how can we further stabilize Maryland's pension fund? Last year's significant increases to employee contributions and decreases to benefits put the fund on a quick path to a higher funded status. The best way to accelerate the fund's stability is to eliminate the corridor funding method which has caused the state to under-fund the pension system for years. Leading pension experts have called for an end to the corridor method, and momentum seems to be building. The Joint Committee on Pensions has decided to work with the State Retirement Agency and the Department of Legislative Services to explore the feasibility of getting out of corridor funding. We look forward to this conversation, which has the best shot at providing long-term stability to Maryland's pension fund.
Let's hope that this conversation focuses on solutions that address the root causes of the problem rather than ideas which would only exacerbate our challenge to provide adequate retirement security for educators and public employees.
Sean Johnson, Annapolis
The writer is managing director of political and legislative affairs for the Maryland State Education Association.
