State employee’s view: 401(k)s not as good as pensions for public employees

Like all workers, public employees have the right to retire securely and with dignity. Defined-contribution 401(k)s offer neither of these.

I’ve been a state employee for the last five years, working for the Minnesota Sex Offender Program, laboring to keep our children and communities safe from harm. Public employees like me aren’t in it for the money; nor are we going to retire to a yacht in the Mediterranean. We do the work we do because we care deeply about our communities.

For our entire careers, we put our own money into our pension, with the state contributing a share as well. The average pension benefit for public employees in Minnesota, not including judges, is $16,000, a modest amount that helps us to support ourselves and our families in retirement.

I plan to stay in my community my entire life. When I retire, I know I’ll be able to support myself financially because of my pension.

401(k)s do not provide the same type of security as pensions for several reasons. First, 401(k)s are subject to the whims of the market. If there’s another recession like in 2008, many working people will lose much of their retirement savings. Second, 401(k)s have much higher fees, putting more of your money into the pockets of Wall Street instead of your well-earned retirement. Due to those fees and lack of investment know-how, most American families are unable to accumulate sufficient savings for retirement through a 401(k). The average 401(k) account balance in Minnesota is $38,482. That’s a tiny fraction of what’s required to retire.

Employees want a safe and reliable retirement plan, which they can get with a pension. Unlike 401(k)s, pensions provide employees with a defined, monthly benefit for life, a sum on which they can depend. Pensions are pooled investments that are professionally managed and that earn higher returns than 401(k)s with lower fees. Pensions are an important tool for recruiting and retaining the best and brightest public employees.

According to the National Institute on Retirement Security, state and local pension-fund benefits in Minnesota support a total of $6.3 billion in total economic output in the state. Also, each dollar in taxpayer contributions to Minnesota’s state and local pension plans supported $9.98 in total economic output for the state. That’s real money with a major economic impact for our communities.

Public employees work hard for their pensions, often making far less than they could in the private sector. Take a look around you; public employees are everywhere. We’re your kids’ teacher and basketball coach; we’re the person standing behind you in the grocery store or sitting beside you in church. Pensions provide the security needed in retirement, and I urge our state lawmakers to not fall for the 401(k) trap.

We should be doing more to boost the retirement security of all Minnesotans — not actively tearing it down. We’re better than that in Minnesota.

​Jessica Langhorst of Sturgeon Lake, Minn., works for the Minnesota Sex Offender Program.

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