As reported by epi.org we have seen that defined-benefit pension plans in the private sector have in recent years: "… now cover 18 percent of private-sector workers, down from 35 percent in the early 1990s." This epic decline in pension benefits in the private sector, has as its main reason for this change, the fact that private sector companies are cognizant that defined-benefit pension plans are often fundamentally unsustainable or problematic by virtue of both the amount and duration of the benefits that must be paid out which often cannot be quantified properly, in addition to the limiting of the company's effectiveness in access to bond monies and other instruments of company growth, competitive considerations, as well as making the company less desirable for mergers or buy-outs. On the other hand, though, governmental employees, who in theory gravitate to their job by virtue of their desire to serve their community, have created pension liabilities in many communities, cities, counties, and various governmental agencies, that are fiscally unsustainable.
The most significant issues with pensions in the first place for many governmental
employees, is that the actuarial basis for the pension in regards to: its amount, its time frame, its determination, its framework, its inflation-adjusted coefficient, its benefits, and so forth, appears to be a situation to which those that legislate and determine these things, have done a massive disservice to their community at large, by not carefully considering the sustainability, fairness, or appropriateness of the pension benefits. Unfortunately, it is always much easier to pass the buck from one generation to another, from one legislature to another, with a wink and a nod, as compared to actually taking the time and diligence to figuring out the consequences of pensions that are far too generous or poorly reasoned out and to do the right things to begin with.
The fact of the matter is that the pensions as they currently exist are in a significant amount of cases a grand disservice to the taxpayers at large. For instance, in Illinois, using teachers as our example, and as reported by teacherpensions.org, it is calculated that: "If instead you lined up every retiree in order of their benefit, the teacher right in the middle would receive a monthly payment of $4,613, or a little more than $55,000 a year." That median pension benefit of $55,000 annually, with, no doubt a cost-of-living adjuster, is how much a teacher will receive in compensation year after year, after retirement, until their death. If you take into full account, that communities are compelled to compensate not only the teachers that are teaching at the present time, but also teachers that have retired and those that are retiring in the future, the amount of money that is budgeted and set aside for teachers is almost always significantly higher than anticipated, and this shortfall must be made up for by the taxpayers who often, in almost every case, do not have nearly anything approaching the generosity of the same defined-pension plans that they are paying for with their taxes.
In point of fact, pensions for government employees should be phased out, and phased out as soon as possible, and replaced with the same sorts of programs that most private-enterprise companies offer today, which is 401K plans and the like. The upshot would probably result in a higher compensation rate being offered for today's governmental employees, with the corresponding result being that governmental agencies and taxpayers would not have to worry about pension blowups and unsustainably in the future.