Category Archives: Benefits

Adjustments to US State and Local Government Reported Pension Data: Proposed Methodology Update

Source: Thomas Aaron, Marcia Van Wagner, Timothy Blake, Moody’s, Request for Comment, July 10, 2019
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In this Request for Comment, we propose a number of changes to the Adjustments to US State and Local Government Reported Pension Data cross-sector rating methodology published in December 2017. Under our proposed changes, we would add descriptions of how we calculate the pension asset shock indicator and how we adjust other post-employment benefits (OPEB). The OPEB adjustment relies on information now required to be reported by issuers under Governmental Accounting Standards Board (GASB) Statements 74 and 75. We also propose to make some editorial changes to enhance readability.

Alternative Realities: The Impact of Extreme Changes in Defined Contribution Plans on Retirement Income Adequacy in America

Source: Jack VanDerhei, EBRI Issue Brief, June 13, 2019
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From the summary:
In recent years there have been a number of policy proposals that call into question the value of existing defined contribution plans. However, the suggested alternatives do not provide a detailed analysis of the impact of terminating defined contribution plans on retirement income adequacy for American households. Previous research by the Employee Benefit Research Institute (EBRI) has provided some tangential evidence with respect to the potential impact. In 2014 EBRI provided simulation analysis of the serious error introduced by models that ignored future contribution activity from defined contribution plans. In 2017 EBRI produced simulation results showing that, if there were no employer-sponsored retirement plans (defined benefit as well as defined contribution) and individuals were assumed to behave in the manner observed for those with no access to such plans, the aggregate retirement deficits would jump from $4.13 trillion to $7.05 trillion (an increase of 71 percent).

Designing Universal Family Care: State-Based Social Insurance Programs for Early Child Care and Education, Paid Family and Medical Leave, and Long-Term Services and Supports

Source: Benjamin W. Veghte, Alexandra L. Bradley, Marc Cohen, Heidi Hartmann, eds., National Academy of Social Insurance, June 2019

From the abstract:
This report explores strategies that states could pursue to better support families in meeting evolving care needs over the lifespan. The first three chapters of the report explore the challenges families face in the realms of early child care and education (ECCE), paid family and medical leave (PFML), and long-term services and supports (LTSS). For each care domain, the panel identifies policy options along with the tradeoffs associated with specific policy choices; this is done within the context of assuring universal access, affordability, and financial stability through well-defined financing mechanisms. The concluding chapter explores how an integrated approach to care policy might be designed—one offering families a single point of access to ECCE, PFML, and LTSS benefits—under an umbrella program called Universal Family Care. Each chapter outlines challenges that states would need to navigate regarding how a new social insurance program would relate to existing federal and state care programs. Each chapter also addresses implementation considerations.

This analysis was developed over a year of deliberations by a Study Panel of 29 experts in care policy from a variety of perspectives. The report does not include recommendations but instead identifies the building blocks and tradeoffs associated with a range of options in the design of a state-based social insurance program. While there are other approaches for improving care supports, this report focuses specifically on social insurance solutions. As well, while there is nothing that precludes such approaches from being adopted at the national level, the focus of this analysis is on the potential for state action. Although addressed primarily to state policymakers, this analysis should be of interest to providers, advocacy organizations, insurers, administrators, and federal policymakers, as well as to any person interested in these issues.

Related:
press release

US Public Pension Landscape Series

Source: Thomas Aaron, Timothy Blake, Moody’s, Sector In-Depth, June 14, 2019
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Many US states and local governments, though certainly not all, face heightened credit challenges stemming from exposure to pension obligations, resulting in a highly varied and complex landscape. The severity of public pension challenges can differ substantially between, and even within, states.

Unfunded liabilities in many cases have reached historic highs, rising costs increasingly pressure some budgets, and aging demographics leave government finances increasingly susceptible to pension asset volatility. Yet in some cases, low or declining levels of pension risk bolster the credit profile of a given state or local government.

Governments grappling with pension challenges must often navigate legal protections for employee benefits that can limit reform options. However, litigation on a variety of pension reforms continues to work its way through courts across the country, offering the potential for precedent-setting decisions.

This series provides a state-by-state, in-depth review of the key issues related to pensions facing state and local governments…..

State Listings:
California
Colorado
Florida
Illinois
Louisiana
Minnesota
New York
Ohio
Oregon
Pennsylvania
Tennessee
Texas
Wisconsin

Paid Parental Leave: On The Table

Source: Rob Taylor, Employment Alert, Volume 36 Issue 12, June 13, 2019
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Doubtless, teachers have taken notice. Last year Delaware Gov. Carney approved a new law giving state workers—including educators—12 weeks of paid parental leave. That’s dramatically different from the situation nationwide where just a few states offer that benefit. Also, the United States is widely known to be one of the least responsive of developed nations in this regard, a somewhat surprising occurrence given the push in this country to find creative solutions to the large, ongoing problem of teacher shortage.

In most places in the U.S., according to an EdWeek series, since teachers do not have paid time off related to pregnancy and birthing, they first use accumulated sick days to stay home with their newborn, and then go to unpaid leave, getting back to the classroom and a needed paycheck as rapidly as possible.

Related:
With No Paid Parental Leave, Many Teachers Return to Class Before They’re Ready
Source: Madeline Will, EdWeek, April 1, 2019
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Employers take action to improve access to quality, affordable health care

Source: Willis Towers Watson, Press Release, May 8, 2019

An increasing number of employers intend to provide their workforce with better access to high-quality and cost-effective health care by embracing a myriad of solutions such as high-performance networks, centers of excellence, onsite or near-site health centers, and accountable care organizations. Nearly one-half (45%) of employers say they intend to adopt these types of solutions by 2021, compared to just 32% that have already done so, according to research from leading global advisory, broking and solutions company Willis Towers Watson’s Health Care Access and Delivery Survey.

Notably, the survey also uncovered employers’ top concerns around delivering high-quality, comprehensive health care to their workforce and found they’re most concerned about inadequate access to mental health services (54%) and substance abuse treatment (47%)…..

Illinois Pension Consolidation: A Path Forward Or A Road To Nowhere?

Source: S&P Global Ratings, May 14, 2019
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– Illinois is considering consolidating numerous single-employer public safety plans as a possible remedy to its pension woes;
– While consolidation will likely lower long-term costs through the pooling of resources, we view these as benefits as marginal, and the current proposals leave major pension funding issues largely unaddressed;
– A proposal to reduce statutorily mandated funding to 80% from 90% and allow an additional 10 years to reach this goal would exacerbate existing pension funding weakness among these types of public safety pension plans.

Pensionomics 2018: Measuring the Economic Impact of Multiemployer DB Pension Expenditures

Source: Diane Oakley, Ilana Boivie, National Institute on Retirement Security, Issue Brief, January 2019

From the abstract:
This study analyzes data on specific private sector pension plans (referred to as “multiemployer plans”) to assess the overall national economic impact of benefits paid by these plans to retirees.

We estimate the employment, output, value added, and tax impacts of pension benefit expenditures from multiemployer plans at the national level, and find that the economic gains attributable to private sector multiemployer DB pension expenditures are considerable.

In 2016, $41.8 billion in pension benefits were paid to 3.5 million retired Americans covered by multiemployer plans. The average benefit paid to retirees covered by these plans was $11,935 per year. Expenditures made out of those pension payments collectively supported:

– Nearly 543,000 American jobs that paid nearly $28 billion in labor income
– $89 billion in total economic output nationwide;
– $50 billion in value added (GDP); and
– $14.7 billion in federal, state, and local tax revenue.

The largest employment impacts occurred in the real estate, food services, health care, and retail trade sectors.

Growing school pension burdens will require more state support

Source: Matthew Butler, Joshua Grundleger, Emily RaimesMoody’s, Sector In-Depth, State government – US, April 9, 2019
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Recent actions by states signal growing recognition that as pension burdens — unfunded liabilities and annual costs — escalate for K-12 school districts, state assistance will likely need to increase. California (Aa3 positive), Indiana (Aaa stable) and Oregon (Aa1 stable) all recently proposed budget legislation that would boost school funding by making increased payments to teacher pension plans on behalf of districts. The proposals call for one-time contributions to the pension plans rather than recurring pension contribution support on behalf of local districts like Colorado (Aa1 stable) and Michigan (Aa1 stable) have recently committed to provide. Additional states are likely to increase funding for teacher pensions,reflecting the growing credit risks underfunded plans present.

Pensions and retiree healthcare challenge some of the largest mass transit enterprises

Source: Thomas Aaron, Timothy Blake, Moody’s, Sector In-Depth, April 11, 2019
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Pensions and retiree healthcare pose a credit risk for some of the largest mass transit enterprises. Transit enterprises with material unfunded liabilities face budget challenges that can limit capital reinvestment, contribute to rising debt loads and/or lead to lower service levels.