Source: U.S. Census Bureau, CB11-TPS.52, December 28, 2011
From the summary:
This quarterly survey provides national summary statistics on the revenues, expenditures and composition of assets of the 100 largest state and local public employee retirement systems in the United States. These 100 systems comprise 89.4 percent of financial activity among such entities, based on the 2007 Census of Governments. This survey presents the most current statistics about investment decisions by state and local public employee retirement systems, which are among the largest types of institutional investors in the U.S. financial markets. These statistical tables are published three months after each calendar quarter and show national financial transactions and trends for the past five years.
Source: Kevin Neuman Industrial and Labor Relations Review, Vol. 64 no. 5, October 2011
From the abstract:
Because the “average” American is spending more time in retirement it is important to understand how satisfied retirees are with their experience. Using data from the Health and Retirement Study the author tests for a positive union effect on retirement satisfaction. The author does not find evidence for a direct union premium since positive union effects disappear after controlling for retirement planning, finances, job characteristics, and duration. However, the author does find strong indirect union effects due predominantly to union members having greater defined benefit pension coverage and less forced retirement. These results suggest that declining unionization may not reduce overall retirement satisfaction directly; however, it may do so indirectly. In addition, retirement satisfaction appears to be adversely affected by negative work conditions such as stooping and job stress. General findings also show who in society has most difficulty adjusting to retirement.
Source: National Association of State Retirement Administrators (NASRA), 2011
Wikipension is an online compendium of information pertinent to retirement benefits for employees of state and local government in the U.S. This site is maintained by the National Association of State Retirement Administrators (NASRA), and is intended to foster knowledge and understanding of these benefits and how they are financed and administered.
Source: National Association of State Retirement Administrators, NASRA Issue Brief, November 2011
Hybrid plans have been in place in public sector retirement systems for decades. Currently, this plan design is receiving increased attention as states find that closing a traditional defined benefit pension plan to new employees could increase–rather than reduce–costs, and that providing only a 401(k)-type plan does not meet retirement security, human resource, or fiscal needs. While most states made the decision to retain their defined benefit plan by modifying required employer and employee contributions, restructuring benefits, or both,2 some have also looked to so-called “hybrid” plans that combine elements of traditional pensions and individual account plans.
This brief examines two types of hybrid plans in use in the public sector. The first is a cash balance plan, which marries elements of traditional pensions and individual accounts into a single plan (see Table 1). The second combines a smaller traditional defined benefit (DB) pension with an individual defined contribution (DC) retirement savings account, referred to in this brief as a “DB+DC plan” (see Table 2). Despite variability among these plans, most contain the core retirement plan elements known to promote retirement security: mandatory participation, shared financing between employers and employees, pooled assets invested by professionals, a benefit that cannot be outlived, and survivor and disability protections.
Source: Alicia H. Munnell, Jean-Pierre Aubry, Josh Hurwitz, and Laura Quinby, Center for Retirement Research at Boston College, SLP#23, November 2011
From the abstract:
States and localities account for pensions in their financial statements according to standards laid out by the Governmental Accounting Standards Board (GASB). Under these standards, state and local plans generally follow an actuarial model and discount their liabilities by the long-term yield on the assets held in the pension fund, roughly 8 percent. Most economists contend that the discount rate should reflect the risk associated with the liabilities and, given that benefits are guaranteed under most state laws, the appropriate discount factor is closer to the riskless rate. The point is not that liabilities should be larger or smaller, but rather that the discount rate should reflect the nature of the liabilities; the characteristics of the assets backing the liabilities are irrelevant…
Source: AON Hewitt, 2011
For corporate defined benefit plans in the United States, the calamitous decade since the collapse of the tech stock bubble in 2000 marked a turning point. In 2010, large corporate plans are commonly closed to new entrants and many of those are completely frozen–committed to paying only those benefits earned by employees in past years. A decade of declining interest rates and low, single-digit equity returns finds most pension plans reporting sizable deficits. In many cases, their sponsors acknowledge that these deficits won’t go away on their own–large cash contributions will be required to fill them.
Given the current picture, it would be easy to miss the transformation that is occurring. Our 2011 Aon Hewitt US Pension Risk Survey finds this transformation taking place in the attitudes, strategies, and governance practices of plan sponsors. This transformation is taking place at plans large and small, underfunded and well funded, open, closed, and frozen. In our view, this represents one of the most important shifts in pension plan investment management practices since the 1980s.
Source: Ronald K. Snell, National Conference of State Legislatures (NCSL), September 29, 2011
Pension plans have a major impact on state budget planning and states are addressing pension fund shortfalls. Read the details in our September 30th summary of enacted 2011 legislation.
Pensions and Retirement Plans – Resources
Source: Mac Taylor, Legislative Analyst’s Ofﬁce, November 8, 2011
From the abstract:
The Governor’s 12-point pension and retiree health plan would result in bold changes for California’s public employee retirement programs. His proposals would shift more of the financial risk for pensions–now borne largely by public employers–to employees and retirees and would, in so doing, substantially ameliorate a key area of long-term financial risk for California governments. Despite the proposal’s strengths, it leaves many questions unanswered, such as how his hybrid plan and retirement age proposals would work and how the state should cope with large unfunded liabilities already affecting the California State Teachers’ Retirement System, the University of California Retirement Plan, and the health benefit program for state and California State University retirees. The Governor’s proposal to increase many current public employees’ pension contributions also raises significant legal and practical issues.
Source: Governing, 2011
The transparency movement is opening up an overwhelming amount of government information. GOVERNING Data culls from the public record to find stories hiding in plain sight — in spreadsheets, reports and databases. Facts matter, visualization makes them understandable and context make them usable in the act of governing — and holding government accountable. Get numbers on the public workforce, the most educated communities, public employee retirement system finances, county government contingencies and coping mechanisms during revenue recessions, and more.
Source: National Institute on Retirement Security and Pension Trustee Advisors on behalf of the Office of New York City Comptroller, October 2011
From the press release:
A report issued today finds that New York City’s defined benefit pension plans can deliver the same retirement income at nearly 40% lower cost than a defined contribution 401(k)-type individual account. The report, A Better Bang for New York City’s Buck, finds that defined benefit savings come from three sources:
• Superior investment returns. The pooled nature of assets in a defined benefit plan result in higher investment returns, partly based on the lower fees that stem from economies of scale, but also because the assets are professionally-not individually-managed. The City plans’ enhanced investment returns save from 21 percent to 22 percent, according to the report.
• Better management of longevity risk. Because pensions pool the longevity risks of a large number of individuals and can determine and plan for mortality on an actuarial basis, New York City’s defined benefit plans save between 10 percent and 13 percent compared to a typical defined contribution plan.
• Portfolio diversification. Unlike defined contribution plans, pension assets can be invested for optimal returns. Individuals using 401(k)s, by comparison, are advised to rebalance their investments, downshifting into less risky and lower-returning assets as they age. This ability to maintain portfolio diversity in the City’s defined benefit plans saves from 4 percent to 5 percent.
– Municipal Employee Compensation in New York City
– The $8 Billion Question
– Sustainable or Not? NYC Pension Cost Projections through 2060