(Reuters) – New York City workers who are hired in the future might be offered 401(k) thrift plans instead of traditional pension plans that guarantee a certain benefit upon retirement, Mayor Michael Bloomberg said Friday.
The necessity of reducing the soaring pension costs for the city’s workers was a centerpiece of Bloomberg’s State of the City address on Wednesday, and he previously has focused on persuading the state to let the city create a less generous fifth tier of pension benefits for future hires.
“You know, you can negotiate with everybody. Maybe it comes out that way,” Bloomberg said on his weekly WOR radio show, when asked about offering 401(k) or thrift plans instead of traditional pensions.
With 401(k) plans, workers only collect their own contributions and those made by their employers — plus or minus any investment profits or losses. These kinds of newer retirement plans disappointed some workers whose stock investments slumped during the credit crunch.
In 2011, New York City’s pension costs will rise to $7 billion from $1.5 billion in 2001, Bloomberg said in his State of the City address.
“That means that this year, the average New York City tax filer will be paying $2,400 more to cover pension costs than they did back then,” he said. Had subway fares risen at the same clip, they would have climbed to $7.05 this year and $8.39 next year — a one-trip ride now costs $2.25.
New York City would need the state’s permission to negotiate any pension benefits — a fifth less costly tier or a thrift plan — with city workers, and Bloomberg has put this request high on his lobbying agenda.
Many states and cities around the nation are struggling to fully fund their pension funds. Despite big shortfalls, they are almost always bound — by contracts, statutes or their own constitutions — to honor their promises to retirees and current workers.
Bloomberg stressed he only wished to slice the costs of retirement plans for people who have yet to be hired.
“My loyalties are to the people who are already working for the city, and I will do everything I can to protect their benefits and their jobs,” Bloomberg said on his radio show.
“I have no obligation to those that we have not yet hired, so hiring the next class of people at different compensation levels with different benefits, you know, you don’t have to take the job. You don’t have to apply for it,” he added.
(Reporting by Joan Gralla; Editing by Kenneth Barry)