What Pension Crisis?

In “The Other National Debt” (June 21), Kevin D. Williamson badly misrepresents the reality of retirement assets for employees of federal, state, and local government in the U.S. Williamson states, “While the federal government runs a reasonably well-administered program for its workers, the states . . . have been running a mad-scientist experiment in their pension funds, making huge promises but skipping the part where they sock away the money to pay for them.”

But in fact, state and local governments have set aside more than $2.5 trillion in assets to advance-fund pension benefits for their employees. These are real assets with real value, including global equities, bonds, real estate, private equities, cash, etc. — in contrast to the “non-marketable government securities” the federal government uses to fund its pensions, which are basically IOUs.

Moreover, the overwhelming majority of state and local governments regularly pay their required pension contributions. The systems that administer these benefits are highly transparent, their investment returns are consistent with those of corporate pensions and other institutional investors, and they are subject to regular audits and accounting standards.

Pension plans for employees of state and local government are not perfect, and in some cases are in need of significant reform. Other employers, however, including the federal government and those in the private sector, would do well to emulate the state and local retirement model, which includes mandatory participation, pooling of assets that are professionally invested, sharing of costs between employees and employers, and benefits that cannot be outlived.

Mr. Williamson is correct that some states, such as New Jersey and Illinois, have chronically failed to pay their share of costs, which has created a deep hole of unfunded pension liabilities. But the vast majority of pension plans sponsored by state and local governments are positioned to continue paying benefits indefinitely. Where this is not the case, reforms are being made to restore sustainability, which includes, in many cases, requiring the employees to contribute more to the cost of their benefits.

The response to retirement insecurity should not be to disparage some of the few remaining decent plans, but rather to implement policies that will restore retirement security to those who have lost it.

Keith Brainard

Research Director

National Association of State Retirement Administrators

Baton Rouge, La.

Kevin D. Williamson Replies: Thirty-one out of the 50 states are expected to see their pension plans run out of money by 2025 — assuming a 6 percent return on their investments. Of the other 19, many are in weak conditions and could find themselves unable to pay benefits as well. That doesn’t sound like a “vast majority” to me.