Retirement plans

Defined-benefit retirement plans are on the way out in the private sector. They’ve bankrupted airlines and they’ve nearly killed the U.S. automobile industry.

Yet the public sector clings stubbornly to the promise of overly generous benefits that, over the long term, lack an adequate source of funding. Nevada’s government employee pension plan and retirement health care subsidy have a combined $10 billion unfunded liability.

Now Clark County School District teachers are learning what thousands of private-sector workers have discovered over the past decade: Some promises cost too much to be kept.

The 2007 Legislature passed a law that makes teachers who retire after Sept. 1, 2008, ineligible for the state’s health care subsidy, known as the Public Employee Benefits Program, to prolong the plan’s solvency. As a result, hundreds of teachers are considering retiring early to claim the health care subsidy, which is more generous than the union plan in which they’d otherwise have to enroll.

So the Clark County Education Association and district administrators are considering a fix: Assessing current teachers a monthly payroll deduction to cover the health care premiums of future retirees.

The notion of having public employees make greater contributions to their retirements is a good idea.

But having current workers foot the bill for retirees isn’t sustainable, either. For proof, look no further than Social Security (which Nevada public employees don’t pay into, incidentally).

Ultimately, the only way to give teachers what they want — higher salaries and more secure retirements — is to do away with the entire defined-benefit system and move them into a defined-contribution, 401(k)-style plan. Diverting the district’s deferred-compensation set-asides directly into the pockets of current workers would increase teacher pay by 20.5 percent, allowing them to save or spend the money as they see fit.

This is not a radical proposal. In fact, it was issued last year by a national, bipartisan education task force that was funded in part by the Bill and Melinda Gates Foundation. Its report, “Tough Choices or Tough Times,” said school districts could erase billions of dollars in liabilities and pay experienced teachers nearly $100,000 per year simply by getting rid of pensions and retirement health care subsidies.

The idea is long overdue. If the school district and the teachers union don’t embrace it, the 2009 Legislature should.