Pension Hypocrisy:
Union Leaders Offer 401(k)s to Own Employees

For Biggest Opponents of Reform it’s ‘Do as I Say, Not as I Do’

August 20, 2015, Harrisburg, Pa.—For years, government union leaders have attacked 401(k)-style reforms to the current pension system as “risky,” “inferior,” “bad for employees,” “fiscally irresponsible,” and “unfair to workers.” They’ve lobbied against reform in Harrisburg, bashed 401(k)s in House and Senate testimony, and relentlessly urged their members and the public to oppose defined contribution and hybrid plans like Senate Bill 1.

But it’s “do as I say, not as I do” at the largest public unions in the state: The Commonwealth Foundation has uncovered that Pennsylvania’s government unions—PSEA, SEIU, UFCW, AFSCME, AFL-CIO, AFT-PA, and PFT—provide 401(k)-style retirement plans to their own employees.

“This is just rank hypocrisy,” commented Matthew J. Brouillette, a former teacher and president and CEO of the Commonwealth Foundation. “While union leaders bad-mouth 401(k)s for teachers and other public employees, they are providing the very same type of retirement plans to their own staff. Either they’re knowingly mistreating their own employees, or they understand that 401(k)-style plans are best for workers and employers and have been opposing beneficial reforms.”

“If 401(k) plans are so ‘irresponsible,’ ‘unfair,’ and responsible for ‘increases in poverty among seniors,’ then why are these unions forcing them on their own employees? Why aren’t these union leaders leading by example and offering their own employees defined benefit plans exclusively?” continued Brouillette. “The truth is, when taxpayers are footing the bill for defined benefit plans, union leaders are all for them. But when unions are paying the bill themselves, suddenly 401(k)-style plans become the wiser choice.

“Ironically, PSEA President Michael Crossey recently characterized the latest proposed pension compromise as ‘the same old political games’ that Pennsylvanians are ‘sick and tired of.’ In a way, Crossey is right. Pennsylvanians are sick and tired of the PSEA’s political games that use taxpayers, teachers, and other public-sector employees as pawns to advance harmful policies. It’s time for union leaders to explain their hypocrisy.” 

Sample of government union public statements opposing 401(k)s

• PSEA Resolutions: “The Association opposes any effort to convert to a defined contribution pension plan. The Association also opposes the creation of a two-tiered retirement benefit plan.” [But the PSEA offers its own employees a two-tiered retirement plan.]
• PSEA Voice magazine: “Legislative committees last spring approved 401(k)-type plans. These proposals spit in the face of research and experience in other states that have shown 401(k)-style or defined contribution plans are more costly to administer, and provide far inferior benefits for most annuitants.” [Then why does PSEA offer such plans to its employees?]
• Senate Testimony of SEIU 668 President Tom Herman: “Over time, defined benefit pension plans work better than 401ks.” “We would adamantly oppose such pension proposals [401(k)s] for new employees that dramatically cuts retirement security and increases costs by billions of dollars.” [Then why does SEIU provide 401(k)s to its employees?]
• Senate Testimony of AFSCME 13 Executive Director David Fillman: “Despite rhetoric to the contrary, a defined contribution plan is bad for both employees and taxpayers.” [Then why aren’t they bad for AFSCME employees and AFSCME?]
• House Testimony of AFT-PA President Ted Kirsch: “Under a defined-contribution plan, new teachers, college faculty and state and school employees would have to save substantially more during their careers to achieve the same level of retirement security.”

  “[M]oving from a defined-benefit plan like PSERS and SERS to a defined-contribution plan (like a 401K) increases poverty among seniors.” [If true, then how does Mr. Kirsch justify providing a 401(k) to his employees?]

  “Abandoning defined-benefit pension plan in favor of a defined- contribution plan exposes taxpayers to greater expense.” [How has AFT-PA avoided this “greater expense” and why couldn’t the taxpayers also avoid it?]

• House Testimony of AFL-CIO Pennsylvania President Rick Bloomindale: “The working men and women of the Pennsylvania AFL-CIO support defined-benefit pension plans and reject efforts to expand defined-contribution plans within our state and the nation.”

  “Switching our employees to a 401(k)-style retirement plan would be fiscally irresponsible and unfair to workers.” [How is the AFL-CIO’s 401(k) both fiscally responsible and fair to its employees, and why couldn’t the Commonwealth of Pennsylvania do the same?]

Matthew Brouillette and other Commonwealth Foundation experts are available for comment today. Please contact Gina Diorio at 862-703-6670 or [email protected] to schedule an interview.

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