By Byron Schlomach, Ph.D.
General Motors is moving 19,000 salaried workers off its pension plan to a 401(k) plan. The move will help reduce the risk GM’s pension poses to the company and investors, including the federal government – i.e., the American taxpayer. GM’s unfunded pension balance is currently $8.7 billion. GM’s profits in 2011 were $7.6 billion.
The new retirement plan makes sense for the company and for employees, who can now take an ownership stake in their retirement savings.
State governments would do well to consider taking similar steps. Arizona’s pension systems have a combined unfunded balance of $16 billion – an official total that is arguably low. State General Fund revenues stand at $8.4 billion, a position far more precarious than GM’s.
Moving state employees to 401(k)-style retirement plans not only makes fiscal sense, but would greatly reduce the risk to taxpayers, who, unlike investors in private companies, cannot simply opt-out of the risk by selling stock.
Dr. Byron Schlomach is Director of the Center for Economic Prosperity at the Goldwater Institute.
Joint Legislative Budget Committee: Historical General Fund Revenue Collections (PDF)
DailyFinance: General Motors Meets on Revenues, Misses on EPS
New York Times: G.M. Changes Pensions for Salaried Workers