Category Archives: Benefits

How Big a Burden are State and Local OPEB Benefits?

Source: Alicia H. Munnell, Jean-Pierre Aubry, and Caroline V. Crawford, Center for State and Local Government Excellence, Issue Brief, March 2016

This brief attempts to answer the question: How big of a burden are OPEB benefits to state and local governments?
Key findings:
• Aggregate unfunded OPEB liabilities are an estimated $862 billion – nearly two thirds of which is held at the local level;
• These unfunded liabilities are equivalent to 28 percent of the unfunded liabilities of pensions when pension liabilities are calculated with an interest rate comparable to OPEBs; and
• While OPEB liabilities are large, several factors – such as sponsors’ flexibility to scale back benefits – limit their potential drain on resources.

Profiling the U.S. Sick Leave Landscape: Presenteeism among Females

Source: Philip Susser and Nicolas R. Ziebarth, Health Services Research, Early View, March 7, 2016
(subscription required)

From the abstract:
Objective: To profile the sick leave landscape in the United States.

Principal Findings: Sixty-five percent of full-time employees have sick pay coverage. Coverage rates are below 20 percent for employees with hourly wages below $10, part-time employees, and employees in the hospitality and leisure industry.

Conclusion: Each week, up to 3 million U.S. employees go to work sick. Females, low-income earners, and those aged 25 to 34 years have a significantly elevated risk of presenteeism behavior.

Telling the Public Pension Story with Hard Data

Source: Elizabeth K. Kellar, Amber Snowden, Government Finance Review, February 2016

Public pensions have been a hot topic in the media and among state and local policymakers. News stories often depict pension funding in dire terms. But what are the facts? And how does the funded status of your government’s pension plan compare with others? Now it’s easy to find out with the Public Plans Database (PPD), a free, publicly accessible database of financial, actuarial, and other plan data for 150 of the nation’s largest local and state public pension plans…..

Public Pension Plan Investment Return Assumptions

Source: National Association of State Retirement Administrators (NASRA), Issue Brief, February 2016

From the introduction:
As of September 30, 2015, state and local government retirement systems held assets of $3.56 trillion. These assets are held in trust and invested to pre-fund the cost of pension benefits. The investment return on these assets matters, as investment earnings account for a majority of public pension financing. A shortfall in long-term expected investment earnings must be made up by higher contributions or reduced benefits.

Funding a pension benefit requires the use of projections, known as actuarial assumptions, about future events. Actuarial assumptions fall into one of two broad categories: demographic and economic. Demographic assumptions are those pertaining to a pension plan’s membership, such as changes in the number of working and retired plan participants; when participants will retire, and how long they’ll live after they retire. Economic assumptions pertain to such factors as the rate of wage growth and the future expected investment return on the fund’s assets.

As with other actuarial assumptions, projecting public pension fund investment returns requires a focus on the long-term. This brief discusses how investment return assumptions are established and evaluated, and compares these assumptions with public funds’ actual investment experience.

Workers Without Paid Sick Leave Less Likely To Take Time Off For Illness Or Injury Compared To Those With Paid Sick Leave

Source: LeaAnne DeRigne, Patricia Stoddard-Dare and Linda Quinn, Health Affairs, Vol. 35 no. 3, March 2016
(subscription required)

From the abstract:
Paid sick leave is an important employer-provided benefit that helps people obtain health care for themselves and their dependents. But paid sick leave is not universally available to US workers. Little is known about paid sick leave and its relationship to health behaviors. Contrary to public health goals to reduce the spread of illness, our findings indicate that in 2013 both full- and part-time working adults without paid sick leave were more likely than workers with that benefit to attend work when ill. Those without paid sick leave were 3.0 times more likely to forgo medical care for themselves and 1.6 times more likely to forgo medical care for their family compared to working adults with paid sick leave benefits. Moreover, the lowest-income group of workers without paid sick leave were at the highest risk of delaying and forgoing medical care for themselves and their family members. Policy makers should consider the potential public health implications of their decisions when contemplating guaranteed sick leave benefits.

State Initiatives to Cover Uncovered Private Sector Workers

Source: Alicia H. Munnell, Anek Belbase and Geoffrey T. Sanzenbacher, Center for Retirement Research at Boston College, IB#16-4, March 2016

The brief’s key findings are:
– Half of private sector workers are not covered by an employer-sponsored retirement plan.
– The federal government has made no progress on closing this coverage gap, so the states are stepping into the breach:
– Four states have adopted a mandatory Auto-IRA program.
– Two other states are setting up voluntary marketplaces.
– Of these two approaches, the Auto-IRA would be much more effective.
– But a national Auto-IRA would be much better than 50 separate state plans.

Health Benefits for Members of Congress and Designated Congressional Staff

Source: Ada S. Cornell, Congressional Research Service, CRS Report, R43194, June 17, 2015

The federal government, as an employer, offers health benefits to its employees, including Members of Congress and congressional staff. Prior to 2014, Members and staff had access to many of the same health benefits as other federal employees. For example, Members and staff were eligible to voluntarily enroll in employer-sponsored health insurance through the Federal Employees Health Benefits (FEHB) Program, and they could choose to participate in other health benefit programs, such as the Federal Flex ible Spending Account Program (FSAFEDS).

Section 1312(d)(3)(D) of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) generally specifies that the only health plans that the federal government may make available to Members and designated congressional staff (with respect to their service as Members or staff) are either created under the ACA or offered through an exchange established under the ACA. A final rule issued by the Office of Personnel Management (OPM) amends FEHB eligibility regulations to comply with Section 1312(d)(3)(D) of the ACA. Under the final rule, beginning January 1, 2014, Members and designated congressional staff are no longer able to purchase FEHB plans as active employees; however, if they enroll in a health plan offered through a small business health options program (SHOP) exchange, they remain eligible for an employer contribution toward coverage. Additionally, the final rule allows Members and designated congressional staff who are eligible for retirement to enroll in a FEHB plan upon retirement.

This report summarizes the provisions of the final rule and describes how it affects current and retired Members and congressional staff. OPM has indicated that Members and congressional staff are still eligible for other health benefits related to federal employment, and these additional health benefits are outlined in this report. These health benefits include FSAFEDS, the Federal Employees Dental and Vision Insurance Program (FEDVIP), the Federal Long Term Care Insurance Program (FLTCIP), the Office of the Attending Physician, and treatment in military facilities. This report also discusses Members’ and staff’s eligibility for Medicare, which does not appear to be affected by the final rule.

For information about the health benefits received by other federal employees (i.e., those who are not affected by the aforementioned final rule), see CRS Report R43922, Federal Employees Health Benefits (FEHB) Program: An Overview.

Retirement Security: Better Information on Income Replacement Rates Needed to Help Workers Plan for Retirement

Source: U.S. Government Accountability Office (GAO), GAO-16-24, March 2016

From the summary:
Household spending patterns varied by age, with mid-career households (those aged 45-49) spending more than older households. For example, according to 2013 survey data from the Bureau of Labor Statistics (BLS), mid-career households spent an estimated average of around $58,500, while young retiree households (those aged 65-69) spent about 20 percent less. While the share of spending was consistent for some categories, other categories had larger variations across age groups. For example, housing expenses comprised the largest share of spending regardless of age, while older households spent more out of pocket on health care than mid-career households. Spending was less variable across age for low-income households compared to other households. For example, there was not a significant difference in average spending between mid-career and young retiree households in the lowest income quartile, compared to an approximately $20,000 difference for the highest income quartile. These variations in spending patterns have implications for the resources households need to maintain their standard of living in retirement.

Researchers and financial industry professionals develop target replacement rates—the percentage of income to aim for in retirement— based on certain key factors, including spending, household characteristics, and pre-retirement earnings. GAO’s analysis of the literature found that calculating an appropriate replacement rate can be complex. For example, there is debate over whether households that have raised children should target a lower replacement rate than households that have not. In addition, a worker’s pre-retirement earnings could be defined as earnings at the end of the worker’s career or as average earnings over the course of the career. Despite these complicated considerations, target replacement rates cited in the articles and reports GAO reviewed typically range between 70 and 85 percent. Some financial industry professionals told GAO that they develop customized targets that take into account workers’ assets and expected spending, while others questioned the usefulness of replacement rates.

The information and tools on replacement rates that the Department of Labor (DOL) provides may be too limited to help workers understand how to use such rates for retirement planning. DOL’s Employee Benefits Security Administration’s (EBSA) website provides information and tools to help American workers better plan for retirement, including a tool to help workers calculate their retirement income needs as a percentage of preretirement income. While EBSA’s materials note that a target replacement rate can vary based on individual circumstances, they do not include specific examples of demographic groups that research indicates can result in higher or lower income replacement needs, or how much a replacement rate might need to be adjusted for those groups or for other individual circumstances. Without additional information, workers may not understand how to adjust target replacement rates when planning for retirement. Further, EBSA’s worksheet and online tool for calculating how much to save use a default replacement rate with no opportunity for a user to adjust the rate based on individual circumstances. Without the ability to adjust the replacement rates used in planning tools, workers may over- or under-estimate how much they need to save for retirement.

The Work Issue: Reimagining the Office

Source: New York Times Magazine, February 25, 2016

Articles include:
What Google Learned From Its Quest to Build the Perfect Team
New research reveals surprising truths about why some work groups thrive and others falter.

Rethinking the Work-Life Equation
It takes more than just policies to make a workplace truly flexible. The whole office culture has to change.

Failure to Lunch
The lamentable rise of desktop dining.

Meet Is Murder
They’re boring. They’re useless. Everyone hates them. So why can’t we stop having meetings?

The Post-Cubicle Office and Its Discontents
Beige partitions have given way to napping lofts, lunch gazebos and lots of open space. But are employees any happier or more productive?

Is Blind Hiring the Best Hiring?
Most companies say they want to attract a diverse workforce, but few deliver. The only solution may be a radical one: anonymity.

Managed by Q’s ‘Good Jobs’ Gamble
Forgoing the gig-economy model, a start-up bets on a strategy that puts cleaning-service workers on a professional path.

The Robots Are Coming for Wall Street
Hundreds of financial analysts are being replaced with software. What office jobs are next?

The New Dream Jobs
What a survey of millennials might tell us about the workplaces of the future.

Trends in employer costs for defined benefit plans

Source: Richard Works, U.S. Bureau of Labor Statistics, Beyond the Numbers, Pay & Benefits, Vol. 5 No. 2, February 2016

From the summary:
Defined benefit pension plans can provide financial security to retirees who receive the monthly benefit payments throughout their retirement. Defined benefit plans are pension plans that provide guaranteed income during retirement, and are often based on a formula that considers years of service and a percentage of a worker’s salary. Employers have traditionally offered defined benefit plans to their employees, but the high costs associated with these plans have caused many employers to switch to alternate retirement plan options. In March 2015, costs for defined benefit plans for private industry employers were approximately 61 cents per employee hour worked, on average. However, when data are averaged only by the employers that offer these plans, the costs are much higher. In this Beyond the Numbers article, we’ll explore how costs fluctuate by industry, occupation, establishment size, and region, and review trends in costs for employees with access to these plans from 2008 to 2015.