Why pension plans are good for workers

By LAPPL Board of Directors on 03/22/2011 @ 05:25 PM

Traditional pension plans have been a proven retirement vehicle for many decades. While ambitious politicians can blithely proclaim that the era of defined benefit plans is over, as we mentioned in our previous post, millions of Americans will soon find that 401(k) plans will have failed miserably to provide them with a secure and dignified retirement. It’s becoming increasingly clear that reliable and secure retirement incomes cannot be provided by 401(k) plans.

Congressman Devin Nunes recently introduced a bill in Congress that is misleadingly titled the “Public Employee Pension Transparency Act.” The real objective of his bill can be found in Nunes’ own words, delivered at a recent gathering of public pension plan opponents.

“So what this will only set up, what the folks in the private sector have figured out a long time ago, was that you have to get away from the defined benefit plan (pensions) and somehow get to a defined contribution (401(k)-style plan).”

How does Nunes propose to “somehow get” rid of defined benefit public pension plans? By legislation that would falsely inflate pension fund liabilities. Nunes’ bill would require public pension plans to report their returns using an absurdly low assumption rate, the rate of return for treasury bills. That rate is currently at 3.6%, half the assumed rate used by most public pension plans and drastically lower than that used by corporate defined benefit plans. The lower the return rate, the worse the funded status of public pension plans would appear to be.

Fitch Ratings, an independent rating agency for government debt, rejected the approach of Nunes and his allies a few weeks ago. Fitch stated they would use a 7% assumption rate in evaluating the soundness of public pension plans. Fitch added that the vast majority of governments would be able to meet their obligations to public pension plans, despite the current pressure on budgets.

Sorry, Congressman Nunes, but we and you know the real problem. As we have pointed out, and as the Wall Street Journal recently reported, the true retirement crisis is the dismal failure of the 401(k) plan to provide an adequate retirement. Tens of millions of Americans who’ve enrolled in 401(k) plans are now realizing they do not have, and will not ever have, enough money to retire in a secure and dignified manner.

A Congressman truly concerned about hard working Americans should be holding hearings and advancing legislation to address the serious problem of 401(k)s, not trumping up misleading legislation designed to “somehow get” more people into that failed system. It is transparently clear that Congressman Nunes does not have that goal.

Pension plans, like those offered to Los Angeles City employees, provide monthly pension checks – a reliable, stable income that retirees cannot outlive. In contrast, a defined contribution 401(k) retirement plan provides no established monthly pension, and it provides nothing to fall back on when the savings account is depleted.

The fact is that pension plans create retirement security while 401(k) plans create retirement insecurity.

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Chief Beck and the Police Commission get it right

By LAPPL Board of Directors on 03/16/2011 @ 04:45 PM

When people threaten police officers with a deadly weapon, they alone are responsible for the consequences of these actions.

This basic tenant of law enforcement was resoundingly upheld on Tuesday as the Police Commission ruled that LAPD Officer Frank Hernandez and other officers at the scene near MacArthur Park acted appropriately – and fully within Department policy – in the Sept. 5, 2010 shooting death of Guatemalan immigrant Manuel Jamines.

In unanimously agreeing with Chief Beck’s findings, the commission reaffirmed the right of police officers to take the actions necessary to protect themselves from lethal threats. Lawful commands of police officers must be obeyed. When they aren’t, the situation can quickly take a tragic turn, as it did in this case.

We commend Chief Beck and the members of the Police Commission for their carefully considered conclusion. They did the right thing and sent a clear message: an officer’s use of lethal force is largely determined by an individual’s actions and willingness to comply with lawful commands.

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401(k) plans are falling short

By LAPPL Board of Directors on 03/15/2011 @ 05:16 PM

With all the talk about public pensions and their liabilities, the imminent arrival a real crisis has gone dramatically underreported. It’ll soon become clear that 401(k) plans – into which millions of Americans workers were forced – have failed to meet their stated purpose of funding a dignified, secure retirement.

The original purpose of 401(k) plans was to provide extra retirement money for highly compensated executives. But with no long term data on these plans’ viability, and with employers privately admitting that a 401(k) plan would prove inadequate for retirement, the 401(k) idea was seized on by American employers as a way to rid themselves of the burden of providing defined benefit pension plans.

Now, as the first generation of Americans placed into these plans near retirement, the failure of the 401(k) as a retirement vehicle is becoming painfully obvious.

Only eight percent of households nearing retirement had accumulated in their 401(k) plan the amount necessary to maintain their current standard of living post-retirement, according to a recent study commissioned by the Wall Street Journal. Even the most optimistic survey shows that workers who’ve been with the same employer for 30 years and are in their 60s have an average balance of only $158,754.

The inherent flaws of the 401(k) plan include leaving participants at the mercy of market cycles, and leaving them with scant time to recover from losses, especially if they occur later in life when the market turns down for a medium or extended period. Participants face the ongoing risk of outliving their assets, no matter how carefully they invest, and with the added burden of high fees for mediocre returns.

The 401(k) plan is a serious failure that is going to haunt and bring a lot of pain to this nation for decades to come.

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LAPPL comments on the retiree healthcare subsidy

By LAPPL Board of Directors on 03/06/2011 @ 12:45 AM

In response to Mayor Villaraigosa’s public request that the Los Angeles Fire and Police Pension (LAFPP) Commissioners reject a proposed increase to retiree healthcare subsidies, the following commentary was presented to the LAFPP Board of Commissioners, on Thursday, March 3, by Director Corina Lee on behalf of the Los Angeles Police Protective League:

The Mayor and other politicians still do not understand that the LAFPP pension commissioners’ fiduciary responsibility and obligation is to the pension fund and the beneficiaries of the fund, who are retirees. When the Mayor makes disingenuous statements that the sworn retiree health subsidies will cost the City $4.8 million, it is extremely misleading. The Mayor fails to state that the subsidy will be amortized over approximately 24 years. Beginning in July 2012, the estimated cost to the City will be approximately $200,000 a year. The Mayor’s intention seems to be to intimidate the Board using his political influence.

The 7% increase will not cover the entire increase of medical costs, which is approximately 10%. What the Mayor fails to recognize and acknowledge is that the LAFPP Board’s actions over the last few decades has led to the pension fund being one of the best funded in the country at 91.6%, which is approximately $14 billion. The Board also abides by best practices, policies and procedures that other funds should adopt. Since July 2010, the rate of return on investments in the pension fund has been 19%. This pension Board has always understood and acted in the best interest of the fund and the recipients of the fund when making its decisions. There are 142 retirees on Tier 1 who receive an average of $2,000 a month. If subsidy increases are not granted, the retirees would have to make up the difference out of their pension checks. Retirees will have to make difficult decisions as to whether they will pay for their medical increases or rent, electricity and food. That is a fact.

The Mayor has chosen to target and attack retirees who do not have the resources or collective voice to fight back in order to maintain what was promised to them after a lifetime of dedicated service to the City of Los Angeles. Only if the Mayor had threatened children would these actions be more despicable. Our retirees deserve what was contractually promised to them in their golden years.

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Why the collective bargaining debate should matter to you

By LAPPL Board of Directors on 03/04/2011 @ 11:21 PM

Last week we ran into criticism for posting about the Wisconsin fight over collective bargaining rights and urging members to support unionized workers there. The inclusion of links to the websites of organizations who are at the forefront of this fight, but with whom many League members disagree, overshadowed the valid call, we feel, for the support of union rights.

Two interesting lines of criticism developed in the posting’s comments section. The first was from members who objected to the attention on the affairs of other states, and the other was from members who felt that we needn’t worry about attempted curbing of collective bargaining rights because public safety officials were being exempted in Wisconsin and this kind of law would never happen in Democrat-controlled, pro-labor California.

But now in Ohio, the collective bargaining rights of police officers and firefighters are indeed on the chopping block. The state senate there passed a bill that proposes to strip away these rights from the state’s public employees, including police officers and firefighters. The bill is widely expected to pass and get the Ohio governor’s approval. This legislation shows that unionized public safety workers are, in at least some parts of the country, no longer immune from the anti-union mood.

And if some of us are resting assured that people will always distinguish between the perceived greed behind the collective bargaining of other public workers, and the deserving status of our own public safety special class, the Ohio bill and its fast track to passage is an indication that many elected officials and voters don’t share our sentiment.

So the question is, when the union rights of police officers and firefighters in other states are being threatened, is it still not our place to voice support for their collective bargaining rights? Being the collective bargaining unit for LAPD officers, we understand how critical this right is. And that’s why we stood up for it. Collective bargaining is critical to LAPD officers by helping to secure fair wages and fair treatment for them. And it helps keep the profession one that attracts the best recruits.

It’s obvious that some sacrifices are needed in tough economic times. Collective bargaining allows these sacrifices to be made with officers’ representation at the table and with ratification by the union members. Without the influence of collective bargaining, the City would implement whatever cuts and sacrifices to the rank-and-file it deemed necessary.

We support unionized workers’ right to protect their own deals. Whether other public workers are overpaid, or whether they deserve pensions, it’s up to them to negotiate with their employers, and vice versa. They should have the right to collectively bargain for compensation, benefits and working conditions that are suitable and appropriate for them and affordable to their employer.

When the time came to negotiate the current contract between the City and rank-and-file officers, Los Angeles city leaders proposed a 14% salary cut. Without collective bargaining, the cut could’ve simply been handed down to officers. But through negotiation, other ways for the City to save $100 million were found and a flat 14% salary cut was averted. Also averted was the proposed decrease to the City’s subsidy for healthcare benefits, which prevented officers from having to pay more out of their own pockets.

Collective bargaining helps ensure that you are still treated and compensated fairly. It ensures you have a say in the sacrifices and cuts you will shoulder. We aren’t asking you to protect the contracts or deals or wages of other workers; that’s the job of their respective unions. But as direct beneficiaries of the collective bargaining process, we should oppose a misguided attack on the process because there’s no guarantee that it won’t spread to our state, in one form or another.

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Bernard Parks’ poor record on public safety speaks for itself

By LAPPL Board of Directors on 02/28/2011 @ 03:55 PM

Perhaps worried that a campaign mailer might strike a chord with voters, Councilmember Bernard C. Parks recently blustered and scrambled to distance himself from his poor record on public safety.

The mailer called out Parks for consistently voting against funding for police hiring, blaming those votes on the City’s financial constraints, and all the while collecting almost half a million dollars a year in combined retirement payments and city council compensation.

The truth is, ever since being let go as LAPD Chief, Parks has sought to settle the score by regularly opposing the hiring of more police officers to keep Los Angeles safe. In 2009, Parks cast a deciding vote in the Budget and Finance Committee, against Mayor Antonio Villaraigosa’s budget, to try and put an end to L.A.’s plan to hire 1,000 new officers. Last month, he opposed the Mayor’s plan to lease the City’s parking garages, which would’ve given our under-policed city the ability to continue hiring police officers at least to attrition.

We aren’t the only ones pointing out Parks’ long disdain for public safety. After his 2009 vote to stop the hiring of 1,000 new officers, the Mayor accused him of "devastating public safety."

Parks sees no irony in lamenting the City’s insufficient funding while collecting an annual $451,789 himself, with his pension and council salary combined. The Mayor and most councilmembers have taken salary cuts, and all City employees have been affected in one way or another, but not Parks. He was also the only councilmember to vote against giving $12 million from member-directed slush funds to the City’s budget so that the City could preserve important services like public safety.

The fact is that Parks’ votes mean fewer police officers on Los Angeles streets. His poor record on public safety – well documented in various newspaper stories – speaks for itself. He’s against hiring new officers, against keeping our neighborhoods safe, and only for protecting his own nest egg.

The more L.A. voters learn about his record, the likelier they are to echo the sentiments of LAPD officers who long ago rejected him as their leader.

Paid for the Los Angeles Police Protective League PAC. Major funding provided by the California Law and Order Independent Expenditure Committee sponsored by the Los Angeles Police Protective League. 1308 W 8th Street Los Angeles, CA 90017. Not Authorized by any City Candidate or City Candidate Controlled Committee.

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The attack on Wisconsin workers is an attack on union members across the nation

By LAPPL Board of Directors on 02/24/2011 @ 04:50 PM

UPDATE 2/25/11 at 1630:

Our intention in the blog below was not to ask members or retirees to align themselves with a group or organization whose overall philosophy they disagree with. The paragraph about MoveOn.org and SEIU was not intended to be an encouragement to participate; it was meant to provide information on the far-reaching effects of the debate and concerns. However, these groups are at the forefront of the fight to protect collective bargaining, and as a Board, we do support any effort to preserve it so that our legal rights in California are not eroded.

In California the “law” that grants public employees collective bargaining rights, or “union” rights, is found in Section 3500 et seq. of the Government Code. It was codified into California law in 1968. It is known as the Meyers-Milias-Brown Act and was signed by then-Governor Ronald Reagan. In the City of Los Angeles the “law” that grants city employees collective bargaining rights is found in Section 4.830 of the city’s Administrative Code.

We urge you to follow the debate, regardless of the players, and beware of any movement in California, such as Assemblyman Mansoor’s bill, that would inhibit our ability to protect your rights and benefits as your collective bargaining organization or “union.” And we ask that you keep in mind that when we are able to bargain in good faith on behalf of our members, we can and do make the case that those who put their lives on the line every day are entitled to unique consideration and benefits that may not be appropriate or even affordable to provide to all government workers.

It is key to recognize that the economy is clearly the flashpoint of the debate and that our goal is to preserve the ability to work with City and state officials in the collective bargaining process, so that the League can continue to protect its members and, at the same time, be part of the fiscal solution in Los Angeles.

Madison, Wisconsin is 2,000 miles away from Los Angeles, but the political attacks against unions there to eliminate basic protections for workers warrant our full attention and strong opposition.

As widely covered by the media in recent weeks, Wisconsin’s Republican governor, Scott Walker, is moving to strip the majority of non-safety public employees of most of their collective bargaining rights. The shocking plan has prompted massive protests and a walkout by Democratic lawmakers there, and has led to increasingly large rallies across the nation.

An attack on the collective bargaining process in any of the 50 states is an attack on every unionized worker in America. California, long a pro-labor state, is no exception. Following the Wisconsin governor’s lead, a Republican state assemblyman from Costa Mesa has announced legislation to eliminate collective bargaining for pension benefits by California's public employees. While Assemblyman Allan Mansoor’s bill – aimed at addressing the increasing costs of retired public employees – stands little chance of passage in the Democrat-controlled Legislature, it serves as a reminder that we must remain vigilant and prepared to take action whenever our basic union rights are threatened.

The thinking behind these attacks is fuzzy at best. For starters, it’s bad politics. A new USA Today/Gallup Poll shows that Americans strongly oppose laws taking away the collective bargaining rights of public employee unions. It found that 61 percent would oppose a law in their state similar to the plan in Wisconsin, and only 33 percent would favor it.

Union leaders and workers throughout the U.S. aren’t taking anything for granted. They are organizing and participating in rallies to show support for Wisconsin working families. More than 2,000 state and local government workers gathered at the State Capitol in Sacramento Tuesday night at a hastily organized rally to support their counterparts in Wisconsin.

A way you can help is by backing candidates who can be counted on to uphold the rights of unions and preserve the collective bargaining process. This is why we perform our due-diligence before every election to endorse only the candidates worthy of the support of the League and its members.

Our brothers and sisters in Wisconsin are under attack. They need and deserve our support. The time to pull together is NOW.

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The Internet and social media: Let the user beware!

By LAPPL Board of Directors on 02/23/2011 @ 11:50 AM

We’re revisiting the topic to remind you once again: use caution online and in the social media world.

The reality is, when you create a personal presence in cyberspace, you must always assume that nothing you do will be private, no matter what privacy options you set. An ongoing investigation by the Wall Street Journal underscores our point. It found that one of the fastest-growing businesses on the Internet is the business of spying on users.

The Journal’s comprehensive study assessed and analyzed the broad array of cookies and other surveillance technology that companies are deploying to track Internet users. It revealed that the tracking of consumers has grown both far more pervasive and far more intrusive than is realized by all but a handful of people in the vanguard of the industry.

These findings bring us to four principles of smart Internet and social media use that cannot be overstated:

1. There are many ways of uncovering online information and e-communications intended to be private.
2. “Privacy” settings are not foolproof or final.
3. If something is relevant to an investigation, a subpoena can force a social media company or e-mail service to provide the information.
4. Investigators will look at not only your profile, but those of your friends to find information and pictures of you to serve their purpose. In many cases, users may not even know that friends have posted information about or pictures of them.

The Internet and social media are convenient and powerful communication tools. But like anything powerful, they must be used with care, and with an appreciation for their risks and possible unintended consequences.

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