States are gearing up to find ways to meet the challenge of how to handle the $1.4 trillion needed to fulfill their pension obligations, the Associated Press reported yesterday. Cities and states around the country are shoring up battered retirement plans by reducing promised benefits to public workers and retirees. The actions taken by states vary. California limited its annual pension payouts, while Kentucky raised retirement ages and suspended pension increases. Illinois reduced benefits for new employees and cut back on automatic pension increases. New Jersey last year increased employee retirement contributions and suspended pension increases. Nowhere have the changes been as sweeping as in Rhode Island, where public sector unions are suing to block an overhaul passed last year. The law raised retirement ages, suspended pension increases for years and created a new benefit plan that combines traditional pensions with something similar to a 401(k) account.
