Category Archives: Benefits

Hawaii Adds New Tool to Monitor State Pension Fund – Regular stress testing will help track fund’s fiscal health

Source: Greg Mennis and Tim Dawson, The Pew Charitable Trusts, September 11, 2017

Hawaii is the latest state to require regular analysis of the potential impact of future economic swings on its public pension funds. Known as stress testing, such calculations can help states monitor the fiscal strength and sustainability of these funds.

This spring, the Legislature unanimously approved a bill requiring the analyses, and Governor David Ige (D) signed it into law July 5. California, Virginia, and Washington already require extensive and routine sensitivity analyses on their public pension plans. Typically, these tests provide estimates of the future financial position of these funds under various economic and investment return scenarios. Interest among other states appears to be growing as well. ….

A Childcare Agenda for the Left

Source: Heidi Hartmann and Gina Chirillo, Dissent, Fall 2017

It has to be taken as a sign of progress that the presidential candidates of both major political parties talked about providing child care and paid family leave in their campaigns, for the first time in U.S. history. But despite this progress, the Trump administration’s child-care proposal is not comprehensive enough to be of much use to the large numbers of low-income families in great need. Trump’s child-care proposal is—surprise, surprise—another tax giveaway to upper-income taxpayers, disguised as an increased tax credit for struggling low-income families. The increase is vanishingly small for low earners. In response to Trump’s plan, Democratic Senator Patty Murray and Representative Bobby Scott drafted the Child Care for Working Families Act. A summary of the bill, expected to be introduced in full tomorrow, shows a more comprehensive plan for high-quality early learning and affordable child care.

Subsidized child care and paid family leave are crucial for American families because they have the potential to increase disposable family income and reduce poverty and inequality in a meaningful way. They are also essential for achieving gender equality, key for children’s well-being, and a stimulus to the economy. For all these reasons, any progressive or Democratic Party platform must include wide-ranging child care and paid family leave proposals. Trump’s plan doesn’t get us there, but as in many other countries with our wealth, we can and must humanize our economic system by building in time and resources for caring for our families…..

Related:
2 Million Parents Forced to Make Career Sacrifices Due to Problems with Child Care
Source: Leila Schochet and Rasheed Malik, Center for American Progress, September 13, 2017

114 Multiemployer Pension Plans Projected to Fail Within 20 Years

Source: Stephen Miller, SHRM, August 29, 2017

Failing union pensions may seek relief through reduced payouts.

As many as 114 multiemployer pension plans covering nearly 1.3 million workers are severely underfunded and headed toward failure within the next 20 years.

The forecast, from a new analysis by actuarial consulting firm Cheiron Inc., draws on the latest annual financial reports filed by multiemployer pension plans with regulators. The troubled plans have total assets of $43.5 billion and liabilities of $79.9 billion, leaving unfunded liabilities—future benefit payouts promised to retirees and beneficiaries for which reserve funds have not been set aside—of $36.4 billion.
Related:
Unfunded Liabilities of the 114 Failing Multiemployer Pension Plans
Source: Cheiron, August 2017
See also: Press release

Unionized College Faculty Are Winning Themselves a Lot of Money

Source: Hamilton Nolan, Splinter, August 25, 2017

Unions are not just a feel-good sort of thing to do. New research about higher ed unions shows just how much workers have actually gained from organizing, in a short period of time.

One of the most active areas of new union organizing in America is higher education: adjunct professors and other academic and non-academic workers on college campuses, who tend to have shockingly low pay and poor job security even though they tend to be highly educated and work in prestigious settings. Those are the sort of ingredients that can motivate people to unionize. And voila: it has been so. And the gains have been clear. Duke University non-tenured faculty members who signed their first union contract this summer immediately got double digit raises and improved job security…..
Related:
SEIU Contract Highlights: The Union Difference
Source: SEIU, Faculty Forward, [2016]
….Unionized contingent faculty often have a higher rate of pay, regular salary increases and pay protections on work done outside of the classroom.
– Across the country, median pay per course was 25% higher for part-time faculty that had union representation…..
Job Security, Improved Benefits and Professional Development
Unionized contingent faculty have an increased level of job security, better benefits and 90 percent of SEIU faculty contracts have established professional development funds….

Unionizing Pays Big Dividend for Professors at Regional Public Universities
Source: Peter Schmidt, Chronicle of Higher Education, April 3, 2016

Full-time instructors at regional public universities earn an average of about $21,000, or nearly 25 percent, more in pay and benefits annually if they belong to a union, concludes a groundbreaking new study of compensation at such institutions. The location and size of the employer also makes a big difference. Those in larger suburban public universities, the highest-paying category of institutions studied, earned an average of nearly $17,000, or 20 percent, more in pay and benefits annually than those at midsize rural institutions, the lowest-paying category.

Investment Return Volatility and the Pennsylvania Public School Employees’ Retirement System

Source: Yimeng Yin and Donald J. Boyd, Nelson A. Rockefeller Institute of Government, Pension Simulation Project Policy Brief, August 2017

The Rockefeller Institute of Government released a report that examines the potential implications of investment return volatility for the Pennsylvania Public School Employees’ Retirement System (PSERS) using the Institute’s state-of-the-art Pension Simulation Model. It also examines the implications of a recent reform that created a hybrid pension plan for new employees. PSERS was selected for study as part of the Rockefeller Institute of Government’s ongoing analysis of risks related to public pension systems.

PSERS is a defined benefit retirement plan for public school employees of the Commonwealth of Pennsylvania. The state and individual school districts are participating employers. As of June 30, 2016, PSERS had over 257,000 active members and approximately 225,000 retirees and other beneficiaries who receive over $476 million in pension and health care benefits each month. PSERS has an uncommon approach to funding under which some employees share partially in the plan’s investment risk, in certain circumstances.

PSERS is deeply underfunded and faces greater challenges than other pension funds we have examined recently. At the end of the 2016 fiscal year, it had a market-value funded ratio of 50 percent and an unfunded liability of approximately $50 billion.

PSERS currently uses a 7.25 percent earnings assumption. Recently it has fallen short of this assumption: its one-year, three-year, five-year, and ten-year annualized rates of return were 1.29 percent, 6.24 percent, 6.01 percent, and 4.94 percent, respectively, for periods ending on June 30, 2016.

In an effort to improve the overall fiscal health of the fund and reduce risks to employers, Pennsylvania lawmakers recently changed the retirement benefit structure available to new state employees. New members of PSERS hired on or after July 1, 2019, will be offered three options for retirement benefits: two hybrid benefit options that include a defined contribution component in addition to a defined benefit component, and a pure defined contribution option. The defined benefit options will provide lower benefits than the current defined benefit plan for existing workers.

The reform is intended to shift part of the funding risk, which is almost entirely borne by the state and school districts under the current defined benefit structure, to new employees…..

Decisions, Decisions: An Update on Retirement Plan Choices for Public Employees and Employers

Source: Jennifer Brown, Matt Larrabee, National Institute on Retirement Security (NIRS) and Milliman, August 2017

From the summary:
Public employees with retirement plan choice overwhelmingly choose defined benefit pension plans over defined contribution 401(k)-type individual accounts.

Decisions, Decisions: An Update on Retirement Plan Choices for Public Employees and Employers, finds that public sector employees with retirement plan choice overwhelming choose defined benefit (DB) pension plans over 401(k)-type defined contribution (DC) individual accounts.

Among the eight states studied that offer employees such a choice, the DB pension take-up rates in 2015 were 80 percent or higher in six states. Two of the plans studied had pension take-up rates higher than 95 percent, while Florida and Michigan had take-up rates of 76 percent and 75 percent, respectively. Importantly, the research finds that even when the retirement plan default option favors a DC plan, most employees still select a DB pension plan.

For example, in Washington the default retirement plan is a combination DB/DC plan. Employees must affirmatively act to elect to participate in the DB pension plan instead, and they do. The majority of newly-hired employees – six out of every ten new hires – actively choose a pension plan.

Related:
Read the press release here.
Watch a webinar replay here.
Download a PowerPoint here.

Pennsylvania’s hybrid plan seen as falling short

Source: James Comtois, Pensions & Investments, July 24, 2017

After many fits and false starts to pension reform, Pennsylvania’s governor has a signed a measure that establishes a hybrid defined benefit/defined contribution plan for new state employees. Although some industry observers believe the new law is a step in the right direction, several others said the switch to a hybrid DB/DC plan does little — if anything — to solve the state’s core underfunding problem…..

…. Both Ms. Childers and Ms. Oakley cited West Virginia and Alaska as two states that decided to switch to a DC plan from a DB plan for state employees — and it didn’t go well for either. In 1991, West Virginia closed its teacher retirement system to new employees to address its underfunding issue, according to a 2016 NIRS survey shared by Ms. Oakley. After 10 years, the replacement DC plan was costing the state twice as much, so it went back to a pension. ….

Secure Choice 2.0: States Blazing a Path to Retirement Security for All

Source: National Conference on Public Employee Retirement Systems (NCPERS), July 2017

From the press release:
State initiatives aimed at helping millions of Americans retire with improved financial security have the momentum to succeed and overcome setbacks, a white paper released today by the National Conference on Public Employee Retirement Systems (NCPERS) has found.

The 36-page white paper, “Secure Choice 2.0: States Blazing a Path to Retirement Security for All,” marks two milestones in the growing movement among states to expand workplace retirement savings programs for private-sector employees:
– Six years ago, in September 2011, NCPERS laid out the rationale for state-facilitated retirement programs for private-sector workers in a white paper, “The Secure Choice Pension: A Way Forward for Retirement Security in the Private Sector.”
– Five years ago, in September 2012, California became the first state to formally act on the Secure Choice model by passing the Secure Choice Retirement Savings Trust Act, which established a board and authorized a comprehensive feasibility study. ….

…..The white paper covers three broad topics: A history of how the Secure Choice approach gained popularity, details on various initiatives underway in the states, and perspectives on what challenges and hurdles states face, especially following the withdrawal earlier this year of ERISA Safe Harbor rules that were designed to make it easier for states to develop their own so-called Auto-IRA programs. In addition, it includes appendixes on state and local developments, model legislation, helpful organizations and websites, and models projecting various savings scenarios….

State and Local Pension Plans Funding Sputters in FY 2016

Source: Jean-Pierre Aubry, Caroline V. Crawford, and Alicia H. Munnell, Center for State and Local Government Excellence, July 2017

From the summary:
SLGE’s annual update on the funded status of state and local pension plans outlines the challenging path that plans have been on, especially since 2009.

Key findings:
• Overall, public pensions are in a better position than they were immediately following the recent economic downturn;
• The ratio of assets to liabilities for the 170 plans in the Public Plans Database decreased from 73 percent in 2015 to 72 percent in 2016, as measured by the traditional GASB standard; and from 73 percent to 68 percent, as measured by the new standard;
• These plans, which account for the vast majority of the members and assets of state and local pension plans, have been paying more of their required contributions (92 percent) relative to recent years;
• Payments as a percentage of payroll have increased to 18.6 percent;
• Plans in the PPD have continued to adjust their annual investment return assumptions downward to an average of 7.6 percent in FY 2016;
• In order to return the aggregate funded ratio above 80 percent, plan sponsors will need to increase their contribution efforts and investment returns must consistently meet or exceed expectations over a sustained, longer term.