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April 21, 2010
Caprio's Pension Plan
General Treasurer Frank Caprio has released a cliff-notes version of his pension reform plan. It's composed of two options for future retirees and will not affect current retirees. To summarize:
Plan 1 - Combination Play or "Hybrid" Plan: Mimics the Federal plan: most of the plan consists of a fixed pension and his supplemented by a 401(k) style component. Costs for pension component are shared equally by employee and taxpayers. The State would provide a fixed contribution to the 401(k) portion while employees could make elective payments (ie; not required to pay in).
Plan 2 - 401(k) style plan: The 5 and 5: State and employee contribute 5% to a 401(k) style plan. Approximately 5,000 state employees already have this plan and the idea is to give future employees a choice between either plan.
There are no details on how much this will save long-term versus the current system.
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"It's composed of two options for future retirees and will not affect current retirees"
If anyone has hard numbers, please share them. But my understanding is that addressing only future retirees will not do much to solve the state's unfunded pension liability.
Posted by: Monique at April 21, 2010 12:59 PMI agree with Monique. I understand that Caprio is silent about the billions of dollars that the state owes vested retirees.
Is it possible that Caprio doesn't know about the current funding shortfall? That might explain how the shortfall was permitted to grow to such a huge amount. Maybe Caprio will claim that no one told him about it!
I suggest that the state should start printing its own currency to pay off the retirees. Obama is doing the same thing on the federal level. And like in Cuba, the currency could only be used at stores run by the state -- probably only inferior goods would be sold. But it would also serve as a way for the state to get back at those ungrateful retirees who live in Florida -- try cashing in RI currency in Palm Beach!
Posted by: Bill at April 21, 2010 4:25 PMThere is no way to guarantee that a defined-benefit plan will be actuarially sound. Personally-owned long-term investment plans are the only fair and honest system.
Posted by: BobN at April 21, 2010 7:02 PMMarc-- You should be fair and put AG Patrick Lynch's pension plan up. It's on his website. And let me tell you what a load of garbage.
Posted by: JB at April 21, 2010 10:12 PM