Arnold and Pension Reform
There is some rhetoric flying around about what the Governor was and was not supporting by way of public employee pension reform last year. The Governor was supporting a change in pensions that would have shifted public sector employees from what is called a “defined benefit” program to what is called a “defined contribution” program. This change, which would have applied to only new hires (all existing public employees would be ‘grandfathered’ under the current rules), would have simply moved the methodology behind public sector retirement benifits to those used in the private sector.
In a defined benefits system, if an employee works for a set number of years, there is a specific formula of exactly how much the employer (in this case, the government) would pay a retiree, based on factors like their last salary, etc.
In a defined contributions system, the employer makes a specified contribution each pay period, or month, or year, into a retirement account for that employee (often times employees can augment this amount). Then this fund (like a 401k) grows over time resulting in an eventual retirement “nest… Read More