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Results list | Start a New Search| Printer Friendly VersionRETIREMENT SYSTEM: Scrap discriminatory policies
BYLINE: MITCHELL KAYE
DATE: May 27, 2005
PUBLICATION: Atlanta Journal-Constitution, The (GA)
EDITION: Home; The Atlanta Journal-Constitution
SECTION: Editorial
PAGE: A23
Amid national debate over President Bush's plans to reform the Social Security system and provide personal investment accounts, little has been mentioned of Georgia's recent effort to reform its antiquated retirement systems. Although public employees are covered almost exclusively by "defined benefit" retirement plans in which payments are guaranteed based upon years of employment and final earnings, last year the law was changed.
In the Teachers' Retirement System, the state's largest with more than $42 billion in assets and over 315,000 members, and in the Employees' Retirement System ($14.3 billion in assets and over 163,000 members) retirees can now elect to receive up to three years of benefits in a single lump-sum payment, in exchange for a lower monthly pension.
This is a small, but significant change in allowing retirees to control their assets for the benefit of themselves, their families and their heirs.
Defined benefit plans are a gamble, based upon life span with its many uncontrollable factors such as gender and race. According to recent data from the National Center for Health Statistics, white women have a life expectancy of 80.5 years, while for black men it is 69.2 years. For the same job, pay and length of service, one group could receive three times the benefits of another.
Furthermore, if you die early, your estate generally receives only your contribution (not your employer's) plus nominal interest -- that's it.
You don't even get back the appreciation on your own money that has accumulated and compounded over many years, unless you choose a reduced benefit option to allow payment to a surviving spouse or heir.
Many have termed defined benefit plans, especially Social Security, as government sponsored discrimination.
Gov. Sonny Perdue has a golden opportunity to capitalize on public attention to reform Georgia's public retirement systems. By first allowing the choice for complete lump-sum payments to new and existing retirees, discrimination from life expectancy will be eliminated.
A second change, consistent with the president's plan, would be to allow new employees to participate in personal investment accounts so that their retirement funds would have "portability" to be taken with them wherever they go without penalty.
The era of lifetime employment with one employer is over.
The big advantage to the state is the reduced future fluctuations in actuarial liabilities. Last year more than $1.2 billion was contributed into the Teacher Retirement System and more than $270 million into the state employee retirement system. This will ultimately translate into better fiscal management, state budgeting and planning.
This past session the Legislature made a historic move to repeal the racist Jim Crow laws from the Georgia statutes. Today, Perdue can build on these gains to reform and modernize our public retirement systems to erase its discriminatory policies while benefiting retirees and the state. It is a win-win for all.
• Former state Rep. Mitchell Kaye is a financial analyst living in Marietta.
PhotoMitchell Kaye
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© 2004 The Atlanta Journal-Constitution