Robitaille Calls for ‘Freeze’ on Public Pensions
Friday, September 24, 2010
His plan would have a different effect on state workers depending on where they are in the system. Those who are already retired would continue to receive their benefits along with any cost of living increases they were promised—there would be no change for them, according to Robitaille spokesman Mike Napolitano.
At the other end, new hires would be put into a 401(k) plan.
Robitaille’s plan gets more complicated for those who are already working. Their benefits would be immediately frozen and they would pay into a 401(k) for the remaining years that they are employed. Upon retirement they would receive two benefits - one through the pension plan frozen at a certain date and the other through their 401(k).
“If we pick January 1, 2012 as the date to freeze the existing pension plan, it is frozen for everyone,” Napolitano said. “If you were currently working and had 10 more years to work you would be frozen in on 1/1/12 and if the last three years are used as a calculation it would in fact be 2009, 2010 and 2011. You would accrue no further benefits at this point.”
Napolitano said a 401(k) system has the advantage of being more flexible for employees. Plus, he said they can take it with them to another job and use the 401(k) for loan and hardship withdrawals—something they can’t do with their traditional pension plans.
“There are also advantages for taxpayers,” Napolitano added. “Matching contributions can easily be adjusted based on the health of the overall Rhode Island economy. In addition, there would not exist a new taxpayer unfunded liability in a 401(k)-style benefit plan. We would end the accumulation of unfunded liability.”
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