Old Pensions, Private and Public, are Expensive – Target Date Funds with No Liability for Poor Performance, Provide Wall Street an Exceedingly Large, Profitable Income Stream
Governor Walker, if he can end collective bargaining for Wisconsin’s public employees, will be free to negotiate alternative pension arrangements, without input from the Unions.
It is no secret that employers prefer defined contribution plans, that are far less costly, than defined benefit plans. An entire industry has come into being with the introduction of 401K plans in the early 1980′s. The trillion dollar money management industry has been shaped by the introduction of defined contribution plans. It is a very easy fee income stream for Wall Street, that requires no work and no responsibility for performance.
How has Wall Street continued to grow their market for Defined Contribution Dollars?
Wall Street worked with the Department of Labor to introduce, in 2006, mandatory employer deductions for retirement savings, that are then invested by Wall Street. Historically, an employee had to chose to enroll in a 401K type savings plan. A regulation was passed that allowed employers to take from an employee’s paycheck dollars for retirement savings, unless that employee opted out. Wall Street now seeks to move to the old-fashioned public employee defined benefit plans to defined contribution plans to increase their market share.
Where are these dollars automatically invested, that are taken from an employee’s paycheck?
These dollars, taken from an employee’s paycheck, are automatically invested in several choices approved by the Department of Labor, with minimal criteria. They are invested in fee laden Wall Street mutual funds, with no mandatory stipulated investment criteria.
How Does This Relate to Governor Walker and Wisconsin’s Public Employees Rights to Collective Bargaining?
Without collective bargaining, Governor Walker would be free to eliminate the costly defined benefit pension and move to a defined contribution plan that will benefit Wall Street, by providing a new source of potential participants.