According to top Republican senator Orrin Hatch, a radical change in public pensions can help ease the crisis on US pension. He said last Tuesday that by having life insurance firms pay benefits through annuity contracts could alleviate underfunding of many plans.
Utah Senator and Finance Committee member Hatch introduced a bill that would have the federal government pay an annual premium. The payment would be given to a state licensed insurer. The amount should be equal to a set of salary percentage of the premium holder. Workers would then get a fixed income annuity contract from the insurance firm.
Annuities worked similarly to pension plans. Holders should pay set amounts in regular installment basis. Hatch added that the accumulated contracts for annuity would even out the interest rate fluctuations. Insurance companies should bid for a proposed contract as stated in the bill.
Spokesperson for Hatch, Julia Lawless said that he bill would not cover past pension liabilities. It would only allow state and local governments to halt underfunding and usage of existing defined benefit plans.
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