Case Study Highlights Perils of Retirement Reform
February 12, 2018
Posted on 2/12/18
The National Institute of Retirement Security (NIRS) recently published a case study highlighting the negative impacts experienced in Palm Beach, Florida, as a result of changes its city council made to the retirement plans for its workers, which included police officers and fire fighters. The change involved dramatically lowering the defined benefit pension (DB) benefits and introducing a new individual 401 (k)-style defined contribution (DC) plan.
The case study highlights several outcomes of the switch:
- Palm Beach saw a mass exodus of safety officers. The number of departures quadrupled in the first year after the change and was on pace to meet or exceed that rate in the second year after the change.
- Neighboring towns benefited as public safety officers looked for better benefits elsewhere. While these veteran employees went to other municipalities, the tenure of employees in Palm Beach went down, which caused concerns about public safety.
- While the shift away from the DB plan saved costs in one area, it increased them in others. Training costs increased significantly as agencies worked to replace the positions left open after the change.
Ultimately, Palm Beach abandoned its DC plans and moved back to a DB plan.
TPEA continues to support the need to provide public employees with a DB plan that recognizes the unique challenges inherent in providing services to the citizens of Texas.
To learn more, read the NIRS case study here.