STRENGTHENING THE DEFINED-BENEFIT PENSION SYSTEM

WHEREAS, defined-benefit pension income plays a critical role in helping older Americans achieve financial security in retirement, reducing their risk of poverty and hardship; and

WHEREAS, rates of poverty among older households without defined-benefit pension income are approximately six times greater than those among older households with defined-benefit pension income; and

WHEREAS, defined-benefit pensions provide lifetime, broad-based and secure sources of retirement income for participants and their families before retirement, including spousal protections and disability benefits; and

WHEREAS, among early Baby Boomers (born 1946-1954), 49 percent of those with defined-contribution plans, and 50 percent of those with no retirement plan risk reduction in their retirement standard of living after they stop working, while only 15 percent of those with defined-benefit pension and 12 percent of those with both defined-benefit and defined-contribution income risk such a reduction; and

WHEREAS, recent turmoil in financial markets has substantially reduced the defined-contribution plan retirement savings of many workers and retirees alike, heightening public concern that many older American households will not accumulate sufficient income to meet their retirement needs; and

WHEREAS, the predictable monthly benefits of defined-benefit plans remain a source of security to retired households with such plans as well as a vital contribution to the economy and revenue base of the communities in which they live; and

WHEREAS, in the public sector, it is common for both employers and employees to make contributions to their pension plans, sharing financial responsibility for such benefits and contributing to the long-term stability of defined-benefit pension plans; and

WHEREAS, six-figure pensions for an extremely small percentage of highly placed managers and administrators and others who have manipulated the current system for their own benefit has been seized on by those who would substantially reduce public services; and

WHEREAS, many public employers are modifying existing defined-benefit plans to accommodate changing conditions rather than switching to other types of plans; and

WHEREAS, coordinated, prudent funding, investment and benefit policies will support the long-term sustainability of public pensions and will continue to serve the needs of employers, employees and taxpayers for many years to come:

RESOLVED, that the American Federation of Teachers support and urge its affiliates to support policies that encourage creation and retention of the defined-benefit pension plans and grant all American workers access to such plans providing income sufficient to enable these workers and their families to enjoy roughly the same standard of living as they did before retirement, thus insuring financial independence and preventing them from turning to public assistance and Medicaid; and

RESOLVED, that the AFT and its affiliates work to see to it that employers are required to regularly update pension benefit design and reward low- and moderate-income career employees consistent with the long-term health of the pension system, using any cost or savings associated with such changes to improve plan funding; and

RESOLVED, that the AFT and its affiliates continue to work to see to it that pension administrators are required to actuarially value all benefit enhancements before they are adopted in order to ensure that stakeholders have a complete understanding of their long-term financial impact; and

RESOLVED, that the AFT and its affiliates support policies and legislation that require all pension plans to maintain funding levels that allow them to pay promised benefits when they are due.