A new analysis of the public pension issue suggests that government should move from pensions that increase based on service time to plans that motivate performance with higher pay that then boosts retirement payouts.
"Solving the Public Pension Plan Dilemma," is written by Dan Van Bogaert, a adjunct professor who teaches human resource management courses at UCLA and Brandman University. His analysis appears in the latest volume of the Journal of Pension Benefits.
Bogaert makes several suggestions, from switching to 401(k)-style defined contribution plans and raising the retirement age for full benefits to mandatory pension funding ratios and restricting union bargaining to wages.
He also wants pension formulas that use a "replacement ratio" method that guarantees employees a certain percentage of their working pay when they retire, along with "pay-for-performance" compensation policies that would reward workers for work well done, not merely their years of service.
"The objective is to offer pay and incentivized rewards for performance, rather than offer entitlements connected to tenure. DB plan formulae based primarily on years of service would be de-emphasized, and replaced by incentives tied to pay, as a means to grow pension benefits," Bogaert writes.
(On a related note, Aaron McLear, who often spoke on behalf of California Pension Reform during its now-suspended campaign to qualify a state and local government pension initiative for the November ballot, last week answered the question, "What's next for pension reform?" Click this link to read his thoughts on CBS 13's website.)
Solving the Public Pension Plan Dilemma