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Baltimore's Pension Pivot


Baltimore Mayor Stephanie Rawklings-Blake introduced new legislation this week that would transition Baltimore from a defined benefit pension system to a 401k style retirement plan. This is part of the city’s effort to address a system which hasn’t been fully funded since 2003. If the plan works as promised, it could save the city $8 million a year by 2022.  The Baltimore Sun reports:

“Under the proposal, new city employees would be required to contribute 5 percent of their salaries to their retirement accounts, with the city contributing an additional 4 percent. New employees would have the option of contributing an additional 2 percent, which would cause the city to contribute an additional 1 percent, according to the plan.

The legislation, which must be approved by the City Council, does not apply to current employees, elected officials or members of the city’s police or fire department.”

Moving from public sector pensions to defined contribution plans makes sense, and we’re glad to see Baltimore, a city drowning in pension costs, making moves to do it. Unlike defined-benefit systems, which are susceptible to abuse from politicians, defined-contribution plans effectively prevent politicians from making promises they can’t keep and protect individuals’ decisions to change jobs while still maintaining a secure retirement fund. The new legislation is part of a trend of states and cities transitioning to the 401k system. Some applause is due to Mayor Rawlings-Blake for backing Baltimore away from the precipice.

[Baltimore skyline photo courtesy of Shutterstock]

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  • ljgude

    Via Meadia has been touting the advantages of defined contribution plans for some time. It is nice to see a Blue city wake up and make the move.

    • Stacy Garvey

      Detroit is scaring them. Mayor Rawklings-Blake doesn’t want her name listed next to Coleman Young’s in future U.S. history texts. And, maybe, that’s the greater purpose of Detroit – to scare Democrats into governing responsibly. We need to watch Wisconsin, North Carolina, and Illinois. Wisconsin and North Carolina are attempting to beat back entitlement government, but it looks as if Illinois is too far gone. Time will tell.

      • Jim__L

        It’s just fascinating that in other countries, there seems to be the attitude that you can gripe all you want, but nothing will change.

        It seems that in America, when enough of us notice reality setting in and start to complain… things change. Maybe not everywhere, maybe not effectively to begin with, but in at least some places, you can see stirrings of realistic responses and corrections.


  • Andrew Allison

    Hold the applause. She exempted herself, other elected officials and the city’s police and fire departments (at a guess the lion’s share of the costs). It’s a sad commentary on Baltimore’s elected officials that she felt it necessary to bribe, er exempt them to pass the measure.

    • Maynerd

      Yes the exemptions are crass and self serving but in the future the reform plan will be leverage against those currently not required to participate.

      Divide and conquer. Scott Walker used the same tactic in Wisconsin.

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