Teacher Pensions Blog

So much of the pension debate today is filled with "if only" statements. It reminds me of this quote from the Federalist No. 51: 

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.

In the famous essay, James Madison and Alexander Hamilton were arguing that we should recognize our failings in how we think about designing government. That acceptance of human nature, however, is rarely embraced in the pension world, where arguments tend to break down over what should happen versus what actually does happen when pension plans are governed by fallible humans. So in honor of Madison and Hamilton, here's my top 10 list of things that would only be true if pension plans were governed by angels:  

1. If pension plans were governed by angels, they would allow teachers to immediately qualify for retirement benefits, rather than making them wait up to ten years. 
2. If pension plans were governed by angels, they would provide all teachers with adequate retirement benefits for every year they work, rather than punishing those who stay less than a full career. 
3. If pension plans were governed by angels, they would encourage veteran workers to retire when it made sense for them, rather than setting one pre-determined age and then nudging them out after that. 
4. If pension plans were governed by angels, they would offer workers complete portability and reciprocity, rather than imposing stiff penalties on mobility. 
5. If pension plans were governed by angels, they would provide Social Security to all workers to ensure national portability and progressivity, rather than making them solely dependent on the state-run plan. 
6. If pension plans were governed by angels, they would make convervative investment assumptions to ensure the plans were fiscally sound and to plan for potential volatility. 
7. If pension plans were governed by angels, they would invest in low-cost, plain-vanilla investments, rather than chasing after hedge funds and private equity.  
8. If pension plans were governed by angels, they would invest with their fiduciary responsibility in mind, rather than using their investments to advance political goals. 
9. If pension plans were governed by angels, they would always make their annual payments, rather than deferring costs to the future. 
10. If pension plans were governed by angels, they would be fully transparent, rather than hiding the true cost of fees and how benefits work for teachers. 

Obviously, none of these things are true, because pension plans are NOT governed by angels. And yet, pension debates proceed as if they are, or as if they could be in the future if somehow our future politicians could act like angels. But that will never be. We should heed Madison and Hamilton's advice, and create ways to avoid these very common human frailties.