Transcript here - Empire Center for New York State Policy

Optimal Option:
SUNY’s Personal Retirement Plan
As a Model for Pension Reform
Presentation by E.J. McMahon
February 16, 2012
Cuomo Tier 6 Proposal
• Higher employee contributions, later
retirement, reduced pension multiplier and
pensionable salary base restrictions for all
defined-benefit pension plans
• Option of defined-contribution plan
“401(k)s simply do not provide
workers with the predictability and
reliability of a defined-benefit
pension, and on their own are not a
viable option to allow workers to retire
with dignity.”
-- state AFL-CIO
“The facts speak for themselves:
replacing defined benefit pensions
with 401(k)’s will put workers’
retirement security in danger.”
-- Binghamton Mayor Matt Ryan
“I stand firmly behind my position that
defined contribution plans are not
adequate for retirement security for
public or private workers.”
-- Comptroller Thomas DiNapoli
SUNY
Optional
Retirement
Program
Eligibility
Vesting
Employees in the Unclassified (e.g., UUP and MC-13)
service who are full-time; and part-time UUP employees
with Term appointments, MC employees who are at least
half-time, and employees designated as eligible under local
community college contract.
Occurs after 366 days of active service. This period may be
waived for employees coming to SUNY with active employer
sponsored retirement annuity contracts from one of the SUNY
currently Authorized Investment Providers. All contributions will
become the property of, and all investments will be directed by,
the participant upon vesting.
Distributions
•Retirement at any age subject to an IRS 10% penalty for
distributions prior to age 59 ½ , unless separating from
service after reaching the normal retirement age of 55
•Distributions exempt from the SUNY ORP are exempt from
New York State Income Taxes.
•Flexible options designed to allow participants to plan their
retirement income distribution according to their own
individual needs and preferences. Include periodic and
systematic cash withdrawals, guaranteed lifetime annuity
payments, and a variety of blended options and lifetime
annuity dependent survivor payment levels.
SUNY Plan Providers
TIAA-CREF
ING
METLIFE
VALIC
CUNY Plan Providers
TIAA-CREF
Guardian Life
MetLife
Optional DC Plan Advantages:
 Early vesting
 Portability
 Flexibility
 Death Benefit
Optional DC Plan Advantages for Worker:
 Early vesting
 Portability
 Flexibility
 Death Benefit
Optional DC Plan Disadvantages for Worker:
 Lack of guaranteed income
 Lower annual benefit*
* Except for longest-tenured if investment returns are strong.
Optional DC Plan Advantages for Employers (Taxpayers):
 Transparency
 Predictability
 Attractiveness to employees who
value career flexibility
Optional DC Plan Disadvantages for Employers (Taxpayers):
 Higher recurring and average cost
Actual and Projected TIAA-CREF
Accumulations and Annuities, SUNY
Cuomo Option Contributions (% Salary):
4% Employer + 0% Employee = 4%
Or
4% Employer + 3% Employee + 3% Employer = 10%
Recommended:
Employee 4-6% based on on Tier 6 DB schedule
Employer 6-8% to bring total to 12%
Plan Design Issues:
• Annuity Preference as at SUNY-CUNY
•Plan Provider Competition
•Fairly Priced Investment Choices
•Default to Lifecycle Funds
•Fee and Expense Transparency
•Consumer Benchmarks (e.g., Brightscope)
“401(k)s simply do not provide
workers with the predictability and
reliability of a defined-benefit
pension, and on their own are not a
viable option to allow workers to retire
with dignity.”
-- state AFL-CIO