In preparation for an expected new attack on VSEA members’ and retirees’ defined benefit pension plan, VSEA is providing this retirement primer:
VSEA members’ and retirees’ current pension plan is called a DEFINED BENEFIT PENSION PLAN. This plan provides you a guaranteed and specified monthly amount in retirement, and your benefit level is in no way impacted by Wall Street and the unreliable fluctuations in financial markets.
Some politicians and wealthy corporate interests will be actively lobbying this session to place future new hires to Vermont state government into a DEFINED CONTRIBUTION PENSION PLAN (a.k.a. 401K) instead of into employees’ and retirees’ current defined benefit plan. A 401K would offer VSEA members and retirees no specific amount of benefits at retirement because a person’s benefit level would be at the mercy of Wall Street, meaning every fluctuation in the market, good or bad, impacts your retirement. If the market goes down when you retire, it’s your problem. Imagine if you were set to retire with a 401K right as the market is crashing, like in 2008. You could be financially devastated.
IMPORTANT! VSEA members and retirees will also have to guard against any proposal to transition your existing defined benefit plan to a “hybrid” plan, which is another tactic the pension-gutting crowd is employing in other states. A hybrid is a combination of defined benefit and 401K plans, and, eventually, this hybrid evolves into a 401K plan solely, so don’t be fooled. The message is, “DON’T MESS WITH THE CURRENT PENSION SYSTEM-PERIOD!”
Equally troubling, the onus is on the individual employee to adequately be investing into his/her 401K during their working years, which studies have shown is too often not the case.
If you live longer than expected, your 401K can run out, whereas a pension lasts your entire life.
The average VSEA retiree earns roughly $19,000 annually in retirement, and that’s with a stable plan.
VSEA members and retirees have repeatedly stepped up to the plate over the years to ensure the defined benefit pension plan’s annual retirement contribution (ARC) is funded. That time is coming again soon!
State Treasurer Beth Pearce often reminds Vermonter’s that defined benefit plans are more cost-effective for Vermont taxpayers. She’s right. A 2017 study found that “rather than lower costs by moving from a defined benefit plan to a 401K plan, states actually experience increased retirement costs for themselves and taxpayers.”
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To request a VSEA “Protect Your Pension” meeting in your worksite please email vsea@vsea.org