401Ks are a disaster: Column

[tblue37]

150. DCBob, you need to understand that a pension is not a "gift" or "bonus"

"added" to the employees salary. It is PART OF the employees negotiated compensation that the employee doesn't get up front but has to wait for because it is deferred.

The employee's compensation package includes a certain amount that does not get paid to him. Instead, it gets deferred. That is his pension. During contract negotiations, the employee and the employer workout what his compensation will be and what his work obligations are. He then does the contracted work for the years up to his retirement, but when he retires, that money in the pension fund is his, because it was always his, even though he didn't get to access it until retirement.

When he retires, the money he gets as a pension is not "extra," but rather money that he EARNED back in his working years but never got to access as cash because it was being tucked away for him in his pension fund.

So the taxpayer is not funding the state employee's pension, except in the sense that taxes support the government's services and functions, so the salaries of state workers are paid by taxes. But it is the employee's own compensation that he earned during his working years that is funding his pension, not any extra taxpayer funds on top of his contracted compensation.