Kelly, in the 1970s and 1980s, virtually every private sector employer in the United States moved from Defined Benefit Plans to Defined Contribution Plans. Today, 96% of private sector workers are covered under DC plans, with only a few legacy participants in DB plans.
Your argument above is a lot of words with very little substance. Everyone — and I do mean, everyone — knows that DC plans cost less to administer than DB plans. There is no need for annual, multi-million dollar actuarial studies. A disastrous year with negative returns like your plans experienced in FYE 06–30–2016 doesn’t result in hundreds of millions of dollars of additional unfunded liability in DC plans like it just did in Houston’s fire and police benefit plans. If you are trying to argue that defined benefit plans are safer or better or less risky to taxpayers than contribution plans, please find five private sector MBAs / CPAs /CFOs who will go on record as agreeing with you.
The “cost to the employee,” “cost to the city,” and other quantifiable amounts you list above would be determined by the City in negotiation with the unions; these numbers depend upon the Plan the City adopts. It is a species argument to say that “proponents of the Plan cannot tell us how much it will cost.” Left to us to design, it would be SUBSTANTIALLY less. There is no way that prudent financial executives would attempt to mirror the results of defined benefit plans through employee and employer contributions. In fact, the whole point of this argument between the two sides is our belief that mathematics ensures that NO government can afford defined benefit plans “in the long run.” The lowered returns into the foreseeable future combined with the ever increasing life expectancies of pensioners makes these plans mathematically impossible to maintain, and the longer we wait to stop enrolling new people into them, the worse the situation is going to get.
I will not here reprint the list of 147 (and growing daily) Houston financial executives who disagree with your position. Instead, I ask readers to review my comment to your previous article, where the names and positions of these people are listed. We, the financial leaders of the City, simply do not agree with the Mayor or you on this subject. Are you up for a televised, town hall debate?