And depend on it to support them in their retirement years. The heightened attention to the integrity and solvency of the RSA is good news.
The search for truth should never be discouraged. Here are some popular myths about the RSA that we’ve heard and seen in the past few weeks. Myth #1: The RSA has “grown” its assets from $500 million to $37 billion in the past 40 years The source of the RSA’s asset “growth” is not just a net positive return on investments, but an overall increase in contribution requirements from state employees, from 5 to 7.5 percent (see below). The RSA relies heavily — for more than a third of its annual revenue — on mandatory “contributions” paid into the system. Those contributions come from state employees and their employers, i.e. And, since state employees and the agencies that employ them are funded by taxes, ultimately taxpayers are the ones “contributing” $1.8 billion a year to the RSA. It’s true that the RSA has made some good investments in traditional stocks and bonds but some investments, like the “private placements” in US Airways and Signal International have been disasters.
Even with some strong returns, a large chunk of their revenue wasn’t “grown” so much as it was taken — participation is a condition of employment. Myth #2: The RSA will never cut benefits The RSA has already cut benefits for new state employees. New state employees are considered “Tier 2” RSA members, meaning, they receive less benefits (lower monthly pension checks) than state employees who joined the system prior to 2013: “Tier 1” members.
Furthermore, “Tier 1” members have also experienced a cut, although veiled: Their mandatory contributions have increased from 5 to 7.5 percent, or an extra $104 every month for a worker making $50,000 a year. You don’t need a Ph.D. In economics or finance to understand this has the same effect as a benefit cut.
Myth #3: The RSA is strong and secure Even the RSA that it has become less financially sound. While there is disagreement about the appropriate valuation of the RSA’s liabilities, a study by two Auburn University professors, which used the RSA’s own Comprehensive Annual Financial Reports, found that the RSA’s reported unfunded liability grew from $2.1 billion in 2003 to more than $15 billion in 2013! And, that’s despite the increase in mandatory contributions for Tier 1 members.
There is no newsletter article or op-ed that has ever “debunked” the RSA’s own numbers. Myth #4: The RSA’s bold investments have led to unusually high returns The RSA’s investments, on average, have seen strong returns recently.
Alabama Teacher Retirement Pay
But the strong returns mostly come from the majority of the RSA’s investments in a typical portfolio of stocks and bonds. The flashy investments in so-called “private placements”, make up about a tenth of the RSA’s investments, and have seen uneven returns. While a boasts of the high returns from 55 Water Street in Manhattan, the public failures of US Airways, National Alabama, and Signal International are noteworthy. Even the investments in golf courses don’t appear to actually earn positive returns for the fund, though it is hard to tell, since the RSA doesn’t publicly report the returns on individual investments. Myth #5: RSA critics want to eliminate state employee pension plans There’s no reason that a traditional pension option for state employees can’t exist alongside a more portable and choice-friendly option like a 401(k). Many employees would prefer the security of a pension, while others may not plan on working the same job for decades, and would prefer something with more choices, portability, and better vesting options. Let the workers choose which plan they want.
Public sector workers deserve to know the facts about where their hard-earned money is going and the truth about the health of their pension plans. Just as importantly, no one should be forced to participate in a program that offers no portability or investment choices. Alabama’s public sector workers deserve greater transparency and the freedom to choose their own retirement plans., executive director of the Follow up on Twitter: @johnsoncenter.
By Brandon Moseley Alabama Political Reporter Alabama Governor Robert Bentley(R) announced that he will hold a news conference in Huntsville Monday to provide details of a proposed Voluntary Retirement Incentive program for eligible state employees. Joining Governor Bentley will be joined by Speaker of the Alabama House Mike Hubbard (R) from Auburn, Alabama Senate President Pro Tem Del Marsh (R) from Anniston, and state Representative Mac McCutcheon (R) from Capshaw. Alabama has a defined benefit pension program. As state employees accumulate years of service and increased pay the state is obligated to pay them an ever increasing pension benefit in their retirement years. Alabama’s pension fund (Retirement Systems of Alabama) is one of the poorest performing pension funds in the country over the last decade.
Alabama Teachers Retirement System Forms
Buying out current employees means that they will stop accruing additional pension benefits and the state can save considerable money by replacing those employees with new employees who are lower on the pay scale than the veteran employees they replace. Since the state of Alabama has a defined benefit plan instead of a defined contribution plan, the state is obligated to guarantee that the fund grows at 8% a year. According to the Alabama Policy Institute (API) since 2003 the cost to taxpayers of maintaining such a generous program has increased from $263 million a year to $999 million.
The Alabama Policy Institute has suggested that enormous cost savings can be generated by switching from a defined benefit plan to a defined contribution plan like a 401 (k). API wrote, “The “transition costs” of reform can be handled through buyouts and one-time government borrowing. By buying out its current employees and closing the state’s DB plan, the state could transition to a DC plan immediately.” The state largest education employees union, the Alabama Education Association (AEA) does not support an employee buyout plan. AEA Executive Secretary Dr. Henry Mabry said in a written statement “It is difficult to see how a retirement buy-out can be offered at a time when our schools have experienced 12,500 fewer educational employees, pay cuts, and benefit cost increases.” Governor Robert Bentley said, “I believe it would allow young teachers looking for jobs right now a chance to get a job. And those teachers looking to retire would have an incentive to retire.” Bentley has said that the state could save $100 million if just 5,000 highly paid veteran teachers would retire providing jobs for 5,000 new college graduates. Secretary Mabry said, “We encourage Gov.
Alabama Education Association
Bentley to consider the importance of experience in our public schools. Consider the numerous intangible benefits of having teachers with decades of experience instilling a healthy environment for stability, discipline, and efficiency in the classroom.” Monday’s news conference will be in the Mark C. Smith Library at the HudsonAlpha Institute for Biotechnology 601 Genome Way NW Huntsville, AL.
Governor Bentley has promised the people of Alabama that he will cut the size of Alabama government by over $one billion in his first term as the state’s governor.