The Rio Grande Foundation recently proposed the idea of placing all new government workers into 401K-style “defined-contribution” retirement plans as a common-sense and relatively popular free market reform for New Mexico (number 9 on the list). After all, the concept is supported by 70 percent of workers nationwide with only 22 percent opposed, according to a recent poll. See graphic below for details:
Government workers have a bit more heartburn about the issue, but are still supportive by nearly 2:1.
The bad news is that a similar transition has not been floated by Gov. Martinez or any legislator/candidate that I’m aware of. The good news is that the idea is spreading and has spread to neighboring Oklahoma which recently adopted 401k-style pensions for new government hires. See the nifty graphic below which documents the spread of such “defined contribution” plans.
As I wrote in our recent issue brief on the topic, “A defined contribution system would allow those workers to save more or less based on their own needs at particular stages in their lives. Ultimately, while labor union leaders prefer to have their members’ interests tied to government and the political system (and the unions), a shift to individually-controlled accounts undermines the one-size-fits-all mentality perpetuated by unions while also empowering workers.” The other major winners are, of course, taxpayers, who no longer face the spiraling costs associated with “defined benefit” pension plans.