In 2010, a group of University of Missouri faculty and staff members from the four campuses were given a task: examine the University of Missouri’s retirement system and offer suggestions for improvement. Though it wasn’t unanimous, the committee ultimately proposed a shift from a defined-benefit (DB) pension plan to a hybrid system which used both DB and defined-contribution (DC) components. The system followed through on the proposal and launched a new hybrid plan in 2012.
Often, people who propose reforming public employee pension systems—people like me and the scholars at the Show-Me Institute—get painted with a very negative brush. In 2013, the American Federation of Teachers listed the Show-Me Institute and two other organizations as personae non gratae for pension fund managers, suggesting that plans should disinvest from funds affiliated with the Institute. In 2015 (and at various other times), Steve Yoakum, executive director of the Public School Retirement System of Missouri, attacked SMI in a letter to retirees. He wrote, “As has become a pattern, ‘studies’ done by the Show-Me Institute and their attendant comments tend to mislead both participants and Missouri citizens and this was no exception.”
What’s interesting is that the report from the University of Missouri faculty makes many of the exact same arguments that we have made at the Show-Me Institute for years. For example, the committee noted that DB plans can provide excellent retirement security for individuals who work a full career at the university. However, few actually do this . Indeed, the report noted “that only 16% [of employees] reach 20 or more years of service.”
What the majority of the members of the committee came to realize was that the standard DB pension plan was simply too risky. The system was shouldering a burden that it could ill afford to carry. So, they suggested a change.
Pension reform is not a crazy conspiracy to rob retirees, as some might have you believe. It is simply common sense planning. It is time for other DB pension systems in Missouri to follow the University of Missouri system’s lead.