In March of this year, the Pension Research Council published “Lessons for Public Pensions from Utah’s Move to Pension Choice.” This paper is an initial attempt at analyzing the effects of Utah’s 2010 public sector pension reforms on public sector employees. As the sponsor of the pension reforms, I am relatively pleased with the objectivity of this report. It is worth reading.

However, I am disappointed, although not surprised, that status-quo apologists are trying to use this report as an argument against reforming defined benefit pension systems, which are trillions of dollars underwater. These apologists have drawn conclusions from this report that the report’s authors are clearly uncomfortable making themselves. Given how important Utah’s pension reforms have been, and will continue to be, for the economic well-being of Utah, I believe clarification is both necessary and prudent.

First a little background: The 2008/2009 market crash blew a $6.5 billion hole in Utah’s public employee retirement systems. Utah taxpayers are now required to pay an additional $500 million each year for the next 20 years to close the gap. Utah’s 2010 pension reforms closed the old system to new enrollees, offering new employees a choice of a defined contribution plan or a hybrid defined benefit/defined contribution plan. Public employees receive an employer contribution towards their retirement of 10 percent of their salary, in addition to Social Security contributions. By all objective measures, these guaranteed retirement contributions are generous. Private sector workers in Utah receive around 3 percent from their employers.

Critics of the Utah pension reforms have seized on two data points from the Pension Research Council report to criticize Utah’s pension reforms. Measuring employee behavior before and after the reforms went into effect in 2011, the data demonstrated that first, employees hired into the new system were about 38 percent less likely to be enrolled into supplemental savings plans than employees in the old system, and second, employee turnover increased for those hired after 2011 than it did for employees of equal tenure hired before 2011.

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On the employee savings rate, the researchers failed to consider the age and demographics of the workers hired into the new system versus the workers who participate in the old system. It is well established that as individuals age and retirement transforms from a distant dream into an imminent reality, personal savings rates increase dramatically. Those new employees hired after 2011 are much more likely to be in their 20s and 30s than the individuals hired prior to 2011. This factor alone could easily explain the difference in participation in supplemental savings plans.

On the employee turnover front, the researchers themselves acknowledge, “post-reform turnover could also reflect a recovering labor market compared to the years prior to the plan change.” This is undoubtedly the case. Employee mobility in the trough of the Great Recession was significantly lower than it was post 2011. When labor markets heat up, employee turnover increases in the public sector as much or more than in the private sector, especially when Utah’s public sector wages are as much as 20 percent below the private market.

If there is a glaring weakness in the Pension Research Council report, it is that the report focused exclusively on pension critiques rather than confronting the broader issue of employee compensation. The dirty little secret about defined benefit pensions is that they are dragging down wages for public workers all across the country. In Utah, we have capped our pension liabilities for new and future workers. Rather than seeking to turn back the clock, we should be focused on systematically repairing public sector wages.

Dan Liljenquist is a former state senator and former U.S. Senate candidate.

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