Category Archives: Benefits

Infographic: Pension liabilities continue to trouble Illinois, Kentucky, Connecticut, New Jersey and others

Source: Moody’s Investors Service, October 3, 2019

Adjusted net pension liabilities (ANPL) declined in states’ fiscal year 2018 reporting due to healthy investment returns in fiscal 2017, though unfunded pension liabilities remain high for some states.

Pension liabilities continue to trouble Illinois, Kentucky, Connecticut, New Jersey and others

Related:
Medians – Adjusted net pension liabilities spike in advance of moderate declines
Source: Pisei Chea, Marcia Van Wagner, Timothy Blake, Nicholas Samuels, Emily Raimes, Tenzing T Lama, Moody’s, Sector In-Depth, August 27, 2019
(subscription required)

Adjusted net pension liabilities (ANPL) spiked in states’ fiscal year 2017 reporting due to poor investment returns in fiscal 2016, according to our state pension medians data. States typically report their pension funding levels with a one-year lag. Thus, favorable investment returns in fiscal 2017-18 will lead to a decline in pension liabilities in fiscal 2018-19 reporting.

Adjustments to Pension and OPEB Data Reported by GASB Issuers, Including US States and Local Governments Methodology
Source: Moody’s, Cross Sector Methodology, October 7, 2019

Credit FAQ: How S&P Global Ratings Will Implement Pension And OPEB Guidance In U.S. Public Finance State And Local Government Credit Analysis
Source: S&P, October 7, 2019
(subscription required)

On Oct. 7, 2019, S&P Global Ratings published “Guidance: Assessing U.S. Public Finance Pension And Other Postemployment Benefit Obligations For GO Debt, Local Government GO Ratings, And State Ratings Methodology.” Here, we answer the most frequently asked questions from investors and other market participants.

Elsewhere, we have also provided an overview on our approach to U.S. state and local government pensions within the context of our three government criteria: See “Credit FAQ: Quick Start Guide To S&P Global Ratings’ Approach To U.S. State And Local Government Pensions,” published May 13, 2019.

U.S. State Pension Reforms Partly Mitigate The Effects Of The Next Recession Primary Credit
Source: Carol H Spain, S&P, September 26, 2019
(subscription required)

Table of Contents:
• Average State Funding Levels Plateau With Notable Exceptions
• Many States Continue With Pension Reforms, Avoiding Backward Measures
• Most States Still Fall Short Of Minimum Funding Progress
• Despite Reforms Despite Improved Assumptions, Plans Remain Vulnerable To Market Volatility
• Demographics Influence The Funded Ratio And Budgetary Vulnerability
• Pension Costs Remain Affordable For Most States, With Notable Exceptions
• Policy Decisions, Not Markets, Will Likely Pose Greatest Future Risks
• Survey Methodology
• Related Research

Despite investment gains in 2018, U.S. states have made relatively slow progress since the Great Recession in improving funded ratios, with S&P Global Ratings’ most recent survey data indicating that the average weighted pension status across state plans was 72.5% compared with 83% in 2007. However, looking at the funded ratios alone falls short of understanding whether or not states have made progress toward improving the overall pension funding picture. Indeed, poor investment returns in select years and maturing pension plan populations have stunted state funding progress. Also, in the years immediately following the Great Recession, many states had reduced plan contributions as a short-term means of balancing budgets, resulting in funding setbacks from which many have yet to recover.

However, in recent years, many states have made conservative changes to actuarial methods and assumptions that, while hindering actuarial funding ratios, show a more realistic assessment of market risk tolerance for states, thus better enabling them to make funding progress. We have also witnessed that many states have learned lessons from funding discipline mistakes over the past ten years and better understand sources of pension liability and costs, and have therefore demonstrated a commitment to actuarially based funding. In this sense, states may be better prepared heading into the next recession despite weaker funded ratios. Yet, in our view, despite some progress, many plans’ current contributions, discount rate assumptions, and investment allocations still fall short of fully mitigating the market volatility that increasingly appears to lie ahead….

2019 Employer Health Benefits Survey

Source: Kaiser Family Foundation, September 25, 2019

From the press release:
Annual family premiums for employer-sponsored health insurance rose 5% to average $20,576 this year, according to the 2019 benchmark KFF Employer Health Benefits Survey released today. Workers’ wages rose 3.4% and inflation rose 2% over the same period.

On average, workers this year are contributing $6,015 toward the cost of family coverage, with employers paying the rest.

Despite the nation’s strong economy and low unemployment, what employers and workers pay toward premiums continues to rise more quickly than workers’ wages and inflation over time. Since 2009, average family premiums have increased 54% and workers’ contribution have increased 71%, several times more quickly than wages (26%) and inflation (20%).

Sections include:

Death by a Thousand Cuts: The Embattled ACA

Source: Diane M. Soubly, Benefits Law Journal, Vol. 32, No. 2, Summer 2019
(subscription required)

In its first seven years, the Patient Protection and Affordable Care Act (ACA), now almost a decade old, decreased the number of uninsured persons who used highly expensive emergency care as primary care and curtailed double digit medical inflation. In the first two years of the Trump Administration, the President, the Executive Branch and Congress have devised ACA’s death by a thousand cuts. As former Solicitor General Donald Verrelli observes at page 2 of the Opening Brief submitted by Intervenor-Appellant The U.S. House of Representatives in the appeal from the Texas district court decision holding ACA unconstitutional, “Despite all that the Act has achieved, its political opponents have made repeated efforts to repeal it or to disable it through litigation.” This article updates employee benefits plan designers and litigators about those continuing efforts in the legal battle for the death of ACA…..

Michigan Supreme Court Denies Lifetime Benefits To Governmental Employees

Source: Amelia Dantzer, Employment Alert, Volume 36, Issue 18, September 4, 2019
(subscription required)

The Michigan Supreme Court has held in a ruling that governmental employees were not entitled to lifetime health benefits because their collective bargaining agreements (CBA) did not create a vested right to lifetime coverage. The court found that none of the relevant bargaining agreements included express language providing for vested, lifetime health benefits, and all the agreements contained “durational” clauses providing that the terms are only in effect for three years. Specifically, the court held that “[t]he CBAs contain a general three-year durational clause, and no provision specifies that the benefits in dispute are subject to any different duration. If the parties meant to vest healthcare benefits for life, they easily could have said so in the CBAs, but they did not.”

Increasing Employee Motivation and Organization Productivity by Implementing Flex-Time

Source: Trish A. Petak, Gabbie S. Miller, American Society of Business and Behavioral Sciences, ASBBS Proceedings of the 26th Annual Conference, 2019
(subscription required)

From the abstract:
Businesses are more efficient when employees are motivated and productive. This study investigated the correlation between flex-time and motivation in employees, as well as flex-time and productivity in employees. The research methodology used for this study was correlation research designed to examine the relationship between flex-time and motivation and the relationship between flex-time and productivity. This quantitative study consisted of 63 voluntary participants. The findings of this study illustrated a very strong positive correlation between flex-time and employee motivation and a strong positive relationship between flex-time and employee productivity.

Family-Friendly Policies, Gender, and Work–Life Balance in the Public Sector

Source: Mary K. Feeney, Justin M. Stritch, Review of Public Personnel Administration, Volume 39 Issue 3, September 2019
(subscription required)

From the abstract:
Family-friendly policies and culture are important components of creating a healthy work environment and are positively related to work outcomes for public employees and organizations. Furthermore, family-friendly policies and culture are critical mechanisms for supporting the careers and advancement of women in public service and enhancing gender equity in public sector employment. While both policies and culture can facilitate women’s participation in the public sector workforce, they may affect men and women differently. Using data from a 2011 study with a nationwide sample of state government employees, we investigate the effects of employee take-up of leave policies, employer supported access to child care, alternative work scheduling, and a culture of family support on work–life balance (WLB). We examine where these variables differ in their effects on WLB among men and women and make specific recommendations to further WLB among women. The results inform the literature on family-friendly policies and culture in public organizations.

Work–Life Program Participation and Employee Work Attitudes: A Quasi-Experimental Analysis Using Matching Methods

Source: Sun Young Kim, David Lee, Review of Public Personnel Administration, OnlineFirst, January 13, 2019

From the abstract:
Work–life programs (WLPs) have been widely adopted and implemented by public organizations as a means of providing employees with greater choices and flexibility in coordinating their work and personal lives. Although previous research has shown that these programs are positively related to various employee attitudes and behaviors, empirical evidence about whether and how such relationships vary by type of WLP is relatively scant. In this study, we categorize WLPs into two different types—work-oriented and life-oriented programs—and explore whether and how participating in distinct types of WLPs has varying impacts on employee work attitudes. A series of Mahalanobis distance matching is conducted using data from the 2011 Federal Employee Viewpoint Survey. The results indicate that the use of life-oriented programs has a positive and substantive impact on employee satisfaction and commitment, while the effect of participating in work-oriented programs is not statistically significant

Employee Benefits—Proposed Regulations Provide Employers with More Flexibility in Offering HRAs to Employees

Source: Mark E. Bokert and Alan Hahn, Employee Relations Law Journal, Vol. 45, No. 1, Summer 2019
(subscription required)

From the abstract:
The Departments of Treasury, Labor, and Health and Human Services jointly issued proposed regulations (the “Proposed Regulations”) providing employers with greater flexibility in offering health reimbursement arrangements (“HRAs”) to employees. Importantly, if the Proposed Regulations are finalized in substantially its current form, employers would be able to offer employees an HRA that “integrates with” individual health insurance coverage. As a result, these Proposed Regulations, in essence, would enable employers to offer HRAs in lieu of a traditional group health plan to their employees. Additionally, the Proposed Regulations set forth conditions under which an HRA can be recognized as a limited excepted benefit HRA, which provides employers with another vehicle to provide employee benefits to their employees.

The Proposed Regulations are set to take effect for plan years beginning on and after January 1, 2020, although this is dependent on the regulations being finalized. The deadline for submitting comments on the Proposed Regulations was December 28, 2018.

Employee Benefits—It’s Time to Start Talking About Annuities in 401(k) Plans

Source: Mark E. Bokert and Alan Hahn, Employee Relations Law Journal, Vol. 45, No. 2, Autumn 2019
(subscription required)

From the abstract:
When an employee retires, he or she typically has three sources of income to draw upon: personal savings, Social Security, and a retirement plan (typically a 401(k) plan). These income sources are subject to certain risks. There is “longevity risk,” i.e., the risk that the retiree will outlive his or her savings. There is also “inflation risk,” i.e., the risk that the retiree’s purchasing power will erode over time. There is also an “incapacity risk,” i.e., the risk that the retiree will have a diminishing capacity to oversee his or her investments as he or she ages.

Annuities can help solve several of these issues because they provide benefits over a retiree’s lifetime. As a result, some employers are adding annuities to their 401(k) plan. Congress is also encouraging 401(k) plan sponsors to offer in-plan annuities. Proposed bipartisan legislation alleviates many concerns that 401(k) plan sponsors have about offering annuities within their plans. This legislation is expected to be enacted into law later this year. As in-plan annuities solve important retirement issues and are far less expensive to participants than those available in the retail market, plan sponsors may wish to consider making in-plan annuities available to their 401(k) plan participants.

Decline in the rate of occupational injuries and illnesses following the implementation of a paid sick leave law in Connecticut

Source: Devan Hawkins, Junli Zhu, American Journal of Industrial Medicine, Early View, July 22, 2019
(subscription required)

From the abstract:

Background:
Workers with paid sick leave may have a lower rate of occupational injuries compared with other workers. This study sought to determine whether there was a decline in the rate of occupational injuries and illnesses following the implementation of a paid sick leave law in Connecticut (CT).

Methods:
Data from the Bureau of Labor Statistics was used to calculate the rate of occupational injuries and illnesses in CT in the 3 years before (2009‐11) and after (2012‐14) the law was implemented. These numbers were compared with New York (NY) and the United States, and between the occupations specified by the CT law and other occupations.

Results:
Among service occupations addressed by the CT paid‐sick‐leave law, the rate of occupational injuries declined more in CT compared to rates for those same occupations in NY and the United States. Within CT, injury and illness rates showed a greater decline in occupations specified by the law (−17.8%; 95% confidence interval [CI] = −15.6‐−19.9) compared with other occupations (−6.8%; 95% CI = −6.6%‐−7.0%) between the two periods.

Conclusions:
A paid sick leave law was associated with an increased decline in occupational injuries and illnesses in affected service workers in the period after implementation. Further research should examine the possible reasons for the associations seen here.