It would look exceptionally odd if lawmakers pushed systematic changes to the state pension system now that they’ve lost access to the PERSI perk.
PERSI is a well-funded defined benefit pension program — meaning police, firefighters, teachers and others who have given many years of service to the people of Idaho can count on a specified payment after they retire.
There’s been a push around the country to convert such defined benefit pension programs into defined contribution systems, where each employee puts aside funds and then manages their own investments.
Such a change has a simple goal: It transfers risk from the employer to the employee. Under a defined benefit program, it’s the employer who bears the risk of managing and investing employees’ contributions in a common fund. With a defined contribution program, workers must pay investment managers to manage their individual retirement funds, and if the market tanks right before they retire, they’re out of luck.
For the financial services industry, such changes could be quite lucrative. Instead of PERSI paying a small staff and contracted portfolio managers to manage the retirement fund, investment managers could charge fat fees to each of the 70,000-odd PERSI beneficiaries individually.
It’s clear such a change would transfer risk onto the backs of police, firefighters and teachers while lining the pockets of the financial services industry.
If that wasn’t the right course for Idaho when lawmakers had an avenue to spike their own pensions, why would it be the right course now that they can’t?