Thursday, March 9, 2006
Hawaii has come up with an original way to keep public pension costs from exploding: offering better pension benefits in the future if workers agree to contribute part of their salary to their pensions in the here and now.
According to the Honolulu Advertiser today:
About 45,000 state and county workers must decide by March 31 if they want to join a new pension plan that pays higher benefits but requires workers to contribute 6 percent of future paychecks.
The Employees' Retirement System began informing government workers in November about the new "hybrid" pension plan. So far less than 13,000 of the 58,000 eligible civil servants in Hawai'i have made a decision. About 80 percent of those have switched to the hybrid program, which can tack hundreds of dollars on to monthly pensions.
As it stands now, most state and county workers don't contribute to their pensions under a plan introduced almost 22 years ago. Many of them are hesitant to cut their take home to get a higher pension later in life.
It will be interesting to see how many county and state workers make the swtich to the hybrid plan prior to the March 31st deadline.
I guess the Hawai'ian experience in this regard reflects the overall savings pattern of most Americans.
It will be interesting to see how many county and state workers make the swtich to the hybrid plan prior to the March 31st deadline.Although it would most likely be in most workers' best interest to join the hybrid plan so as to have more money in retirement, it appears that a large number of workers are unwilling, or perhaps unable, to give up short term benefits for long term gains.