"Social Anxiety: Privatization Unpopular At State Level"
Previously on ThinkProgress we took a look at how other countries faired privatizing government retirement accounts. (Answer: very poorly).
But you don’t have to look abroad for empirical data about privatization. Right here in the USA, several states have given it a whirl — giving public employees the opportunity to switch their government retirement plans to private accounts. The bottom line: people generally aren’t interested. And many of those that do opt-in end up with lower benefits. Here’s a breakdown, culled from this morning’s LA Times:
When Nebraska’s state and county workers were given do-it-yourself accounts, they made so many investment errors that they ended up making less than colleagues with fixed-benefit pensions — and less than what analysts have said is needed for old age. Their poor performance led the Nebraska Legislature two years ago to junk the accounts for new employees.
In West Virginia, teachers who shifted from pensions to accounts plowed 40% of their money into investments so conservative that they effectively ensured that they would get a pension-like payment in old age — but at a lower benefit level than in the system they had left behind.
When Montana made a similar offer to 30,000 state workers in 2002, it spent $1.5 million to set up the new system, conducted more than 600 seminars and gave people a year to decide. The result, according to Michael J. O’Connor, executive director of the state’s Public Employee Retirement Administration: 900 chose accounts.
When Michigan quit offering its traditional pension program to new employees in 1997 and replaced it with defined contribution accounts, it gave existing workers the right to switch to the new plan. Despite the state offering to contribute generously to the accounts, about 3,000 workers out of 57,000 signed on, according to state officials.
When Ohio offered its teachers in 2001 and later its state and local workers the choice of a pension, an account or a hybrid plan (combining a pared-down pension with an account), fewer than 5% picked accounts.
Early surveys of Florida’s 600,000-plus public employees suggested that more than half would go for accounts. But since the accounts’ introduction in 2002, 43,000 employees, or about 7%, have enrolled.