(Reuters) - In an unusual public attack, the New York state comptroller blasted Governor Andrew Cuomo’s recommendation that public employees be offered the option of enrolling in a 401(k) thrift plan instead of the traditional defined benefit plan.
“Coordinated, sustained attacks by anti-pension advocates have falsely cast public pensions as costly, unsustainable giveaways that are bankrupting states and localities,” Comptroller Thomas DiNapoli said in prepared remarks for a pension forum in Washington, D.C.
In the $132.5 billion budget plan he unveiled on Tuesday, Cuomo, a Democrat, included a proposal to give new hires retirement accounts similar to those used by employees in the private sector as a way to cut benefit costs.
Those kinds of thrift plans, which pay employees the money they save plus any investment earnings, would be a first in New York, although a few states already offer them.
DiNapoli, also a Democrat, did not mention the governor by name. While the level of pension contributions and controlling overtime abuse are subjects that can be debated, he said: “What I think is unacceptable is promoting the more extreme change of replacing defined benefit plans with 401(k)s.”
New York’s $146.5 billion pension plan is a rarity in the United States because it is fully funded. Many other states are struggling with huge unfunded liabilities, sometimes because they skipped contributions during economic downturns.
Amid a national debate over whether public employees’ benefits are too rich at the expense of taxpayers, governors in many states, including California’s Jerry Brown, are trying to trim the costs of pension benefits.
A Cuomo spokesman had no immediate comment on DiNapoli’s remarks.
Cuomo had suggested an alternative from moving to the thrift plans, which are also frequently called defined contribution plans, by creating a layer of less generous benefits for new hires, known as “Tier 6.”
Defined benefit plans, which pay retirees a set benefit for life, cost less than thrift plans, DiNapoli said, citing a variety of factors, including the higher fees individuals pay and their need to make investment decisions based on when they will retire instead of market conditions.
Some 77 percent of New York retirees have remained residents as opposed to moving out of state, which aids the economy with spending of $6.5 billion a year and paying $1.3 billion in property taxes, DiNapoli said.
Despite tabloid headlines about overly generous pensions, DiNapoli said less than one-half of 1 percent of the state’s 385,000 retirees get more than $100,000 a year. About 76 percent of the retirees get less than $30,000 a year.
Reporting By Joan Gralla, Editing by G Crosse