Saturday, March 5, 2011

A Bad Deal for Taxpayers

"401(k) plans are a bad deal for taxpayers. Dollar for dollar, a traditional pension plan yields more pension benefits than do 401(k) plans because 401(k) management and investment fees are three times higher. And professionals who manage money in pooled pension funds usually get higher returns than workers who manage their own 401(k) accounts. The only clear winners when pensions switch over to the 401(k) plans are brokers and bankers.

The form of pension plan influences the type of employee attracted and retained. Want an old cop to retire? Want to offer a career path to a young, earnest would-be teacher? Use a traditional plan. Risk seekers and high turnover workers tend to prefer 401(k) plans; but do taxpayers prefer those characteristics in a public employee?"