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Wednesday, April 27, 2011

Walker's War on Safety Net - Public pensions face changes

Mike Ivey, who writes the Biz Beat column for the Capital Times in Madison, recently wrote Public pensions face changes (4/27). It is a short piece with some interesting references. It also scratches the surface on a good number of other issues – most significantly legal. The following blog entry on this topic was provided a few days ago NYTimes - Public Pensions, Once Off Limits, Face Budget Cuts (4/25). Another blog entry related to this is from March 1st Public Employees' Contributions To Pensions . This last entry also links to - David Cay Johnston. It is lengthy but worth printing and reading with a pencil in hand and start writing letters, NOW!

An ounce of awareness is worth a ton of politics, of which the latter may be about to fall on many Wisconsinites. David Cay Johnston makes the point that 401K, are very inefficient investment vehicles.  Think about it: 1) the time an individual has to devote, 2) the time and number of additional administrators required in organizations, and 3) the multitude of fees that administrators and investment vehicles collect (such as mutual funds). Finally, 401K are a tax break for those with any discretionary income.

Traditional or defined benefit pension plans, properly administered, increase economic efficiency, while the newer defined contribution plans have high costs whether done one at a time through Individual Retirement Accounts or in group plans like 401(k)s.

Hopefully as there is time to check the references provided in Biz Beat we may see otherwise! As another idea all Wisconsinites should be offered a “deferred compensation 401K” administered by the Employee Trust Funds and thus secure excellent ROI , and avoid the problems listed above.

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