Not all pensions should be honored

A pension is part of a worker’s compensation that is a deferred payment. Some workers die before all the money they have contributed is returned while others receive more than they contributed by living longer.

The moral problem with eliminating pensions, as has happened in private business and is now underway in municipalities, is that it breaches a promise, one that comes close to theft because the employer held back part of workers’ wages and now reneges on the promise to return that money. The practical problem is that sometimes employers run out of money to continue funding pensions.

Keeping promises is one of the basic principles of ethics. Leslie Stevenson, in Ten Theories of Human Nature, writes, “Without a direct connection between word and deed there is no basis for trust, since trust rests on the premise that what is said will be done. Without this basic trust, individuals lose the ability to represent themselves sincerely and to rely on others with any degree of confidence. Accordingly, society loses its footing . . . Trust is a critical ingredient of all dependable social interaction.”

A promise is binding, as far as feasible, but not when the circumstances change dramatically. For example, a family may promise children a trip to Disneyworld but now find that due to being unemployed they can no longer afford it. Money set aside must be used for more urgent needs. It isn’t that they don’t want to take the anticipated vacation but they can’t.

If the family, though, squandered the money instead of saving for it or parents choose to spend the money on their own pleasure, then it is fair to say that they have broken their promise that should have been kept.

There is a duty that pensions be honored; there must be a convincing reason why they will not. One legitimate reason is insolvency—and if the insolvency is the result of bad or corrupt management, then those managers must be held accountable, as the law now allows.

There is another reason, at least in my mind, to breach the pension contract and that is when a public employee is convicted of a crime. Alan Hevesi, New York State’s former comptroller, was the sole pension-fund trustee and is serving 1-to-4 years for having received favors worth more than $1 million from those seeking business with the fund. He also paid more than $200,000 in restitution. “I’m culpable, I’m responsible and I apologize,” he said a couple of weeks ago.

Gov. Andrew Cuomo, who wants public employees convicted of felonies to forfeit their state pensions, is using Hevesi as an example. For Hevesi is not only costing the state as a convict, he also will receive yearly $105,000 pension. A bribe-taking judge and a sanitation supervisor who permitted toxic dumping also receive state pensions while in prison.

New York’s constitution mandates fulfilling pension commitments, and there appears to be exception for felons. New Jersey doesn’t have such restrictions and, in fact, requires pension forfeiture for certain crimes by public employees. Illinois, too, mandates that pensions be forfeited if there is a felony related to a person’s public service.

While current New York law protects all pensions, I think there are valid moral reasons to change it. Public office needs to be viewed as a public trust. The violation of that trust causes more harm to the public good than does an equivalent breach in the private sphere. The fairest way for the public to express its disgust—beyond restitution, fines and prison sentences—is to continue to pay the pension up to the point that the money initially deferred is repaid, but not more. A felon is entitled to keep what is theirs but they are not entitled to another cent from public funds.


3 thoughts on “Not all pensions should be honored

  1. Do you think that the key issue here is that they (folks like Hevesi) are public figures AND public employees, or that once someone in the public service however low-level and uninvolved in “face politics” they are, they should be stripped of publicly funded benefits like pensions, unemployment or medicare….

    • It is that they have received public money and shouldn’t continue to receive public money if they’ve been convicted of a felony. But they are entitled to receive what they have already contributed to the fund. That money is rightfully theirs.
      This applies to all who are public employees, public figures or not.

  2. Pingback: Is personality an unrewarded risk? « Henrytapper's Blog

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