The private sector has been using 401(k)s for years. Michigan has embraced the concept, and it would be a good idea for Illinois to follow. The Editors at Investor’s Business Daily write:
So what did Michigan do to avoid Illinois’ fate? It embraced bold pension reforms that will protect taxpayers and provide a solid retirement benefit to teachers.
First, it’s shifting its public school teachers toward defined contribution plans. All new hires will be automatically enrolled in a 401(k)-type plan with a default 10% contribution rate. Teachers will still be able to opt for a traditional defined benefit pension, but one that splits costs 50-50 between workers and the state, and includes safeguards that will prevent the funding ratio from dropping below 85%.
Read more here.