State government pensions are short $5.8 trillion, according to a new report from the American Legislative Exchange Council (ALEC). It says the unfunded liabilities are a looming threat to the states’ financial health—not to mention taxpayers and retirees. Most government plans are defined-benefit, which means workers are guaranteed a fixed windfall at retirement. There are no savings or contributions along the way.
ALEC’s Jonathan Williams says states should adopt a 401k-style plan where the employee and sometimes the employer will put money aside each year for the worker’s pension. NTD asked Williams if it’s not that the pensions are too generous—it’s just how they’re managed that’s the problem.
