May 7, 2014


The proponents of pension reform, backed and funded by groups such as ALEC, are at it once again. The Urban Institute alongside the Pew Charitable Trust, which is bankrolled by the pro-charter Arnold Foundation, released a report that outlines and promotes a “cash balance” pension plan in Kentucky to serve as a model for reform in other states. The report claims that the Kentucky-style plan leads to stronger fiscal health and retirement security.


The study is another attempt to propagate the pension crisis myth and advocate for an alternative plan that will eventually lead to a complete lack of retirement security. The truth of the matter is that Indiana has a public pension plan that is the envy of most every other state.


The “cash balance” plan described in this report associated with Kentucky discriminates against workers who decide to spend an entire career in public service and provides an advantage to short-term workers. One negative consequence is higher employee turnover – a result that is both costly and detrimental to the quality of the workforce.


Indiana is no stranger to pension reform efforts. Legislative plans to privatize Annuity Savings Account portions of PERF and TRF members’ pensions during a last-minute move in the 2013 General Assembly were halted. However, INPRS immediately began action to contract out ASA annuities to a 3rd party provider without guidance from the legislature. Legislation in 2014 has slowed down that process and has kept ASA annuities in-house for the time-being, but Hoosiers only need to look at similar attacks on public pensions across the country to see how dedicated the ALEC-style reformers are in cutting benefits to workers. 


It is clear that the underlying goal, at least for public pensions associated with school employees, is to have a less experienced, revolving door, short-term school employee workforce – solely so that pension obligations over time are reduced.  At the end of the day, it will be the children who bear the ultimate cost.