Category Archives: Pensions

Pensions And Retirement Plan Enactments In 2011 State Legislatures (as of September 30, 2011)

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.
See also:
Pensions and Retirement Plans – Resources

Public Pension and Retiree Health Benefits: An Initial Response to the Governor’s Proposal

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.

Governing Data

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.

A Better Bang for New York City’s Buck

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.
Previous reports:
Municipal Employee Compensation in New York City
The $8 Billion Question
Sustainable or Not? NYC Pension Cost Projections through 2060

How Prepared Are State and Local Workers for Retirement?

Source: Alicia H. Munnell, Jean-Pierre Aubry, Josh Hurwitz, and Laura Quinby, Center for Retirement Research at Boston College, SLP#22, October 2011

From the abstract:
A widespread perception is that state-local government workers receive high pension benefits which, combined with Social Security, provide more than adequate retirement income. The perception is consistent with multiplying the 2-percent benefit factor in most plan formulae by a 35- to 40-year career and adding a Social Security benefit. But this calculation assumes that individuals spend enough of their career in the public sector to produce such a retirement outcome. This brief summarizes the results of a paper that uses the Health and Retirement Study (HRS) and actuarial reports published by state and local pension systems to test the hypothesis that state-local workers have more than enough money for retirement.
See also:
Working paper

2009 State and Local Public Employee Retirement Systems Survey

Source: U.S. Census Bureau, October 13, 2011

From the press release:
The nation’s state and local public employee retirement systems had $2.5 trillion in total cash and investment holdings in 2009, a $726.1 billion or 22.7 percent decrease from $3.2 trillion in 2008, according to new statistics from the U.S. Census Bureau. This follows a $176.7 billion loss the previous year.

These statistics come from the 2009 State and Local Public Employee Retirement Systems Survey, which provides an annual look at the financial activity and membership information of the nation’s state and local public employee retirement systems, including revenues, expenditures, investment holdings and number of retirement systems.
See also:
Summary report

2011 Health Confidence Survey: Most Americans Unfamiliar With Key Aspect of Health Reform, and Is There a Future for Retirement?

Source: Employee Benefit Research Institute, EBRI Notes, Vol. 32, No. 9, September 2011

From the summary:
2011 Health Confidence Survey
Findings from the 2011 Health Confidence Survey (HCS) demonstrate that, despite the passage of health reform a year ago, most Americans are unfamiliar with health insurance exchanges, a key aspect of the health reform law (the Patient Protection and Affordable Care Act of 2010, or PPACA). Furthermore, dissatisfaction with the American health care system remains widespread; while confidence regarding various aspects of today’s health care system is not high, it has neither fallen nor increased as a result of passage of health reform.

Is There a Future for Retirement?
Various reports in recent years suggest that working an extra two or three years would solve the problem of inadequate retirement savings for most people, but this has not been well documented or quantified. New EBRI research presented at the policy forum addressed that question with comprehensive data from its Retirement Security Projection Model.

Decisions, Decisions: Retirement Plan Choices for Public Employees and Employers

Source: Mark Olleman, and Ilana Boivie, National Institute on Retirement Security, September 2011

From the summary:
A new study finds that defined benefit (DB) pensions are strongly preferred over 401(k)-type defined contribution (DC) individual accounts.

The study analyzes seven state retirement systems that offer a choice between DB and DC plans to find that the DB uptake rate ranges from 98 to 75 percent. The percentage of new employees choosing DC plans ranges from 2 to 25 percent for the plans studied.

In recent years, a few states have offered public employees a choice between primary DB and DC plans. The new study, Decisions, Decisions: Retirement Plan Choices for Public Employees and Employers, analyzes the choices made by employees and finds that:

* When given the choice between a primary DB or DC plan, public employees overwhelmingly choose the DB pension plan.
* DB pensions are more cost efficient than DC accounts due to higher investment returns and longevity risk pooling.
* DC accounts lack supplemental benefits such as death and disability protection. These can still be provided, but require extra contributions outside the DC plan which are therefore not deposited into the members’ accounts.
* When states look at shifting from a DB pension to DC accounts, such a shift does not close funding shortfalls and can increase retirement costs.
* A “hybrid” plan for new employees in Utah provides a unique case study in that it has capped the pension funding risk to the employer and shifted risk to employees.
See also:
Press Release
PowerPoint
FAQ
Fact Sheet

‘Retirement Heist’: How Firms Trimmed Pensions

Source: NPR Staff, NPR Morning Edition, September 29, 2011

As companies have been moving away from traditional pension plans, they have been shifting employees to new retirement plans, such as 401(k)s, that transfer the cost — and the risk — to workers.Companies have claimed for years that old-style pensions were unsustainable. Author Ellen Schultz tells Morning Edition host Steve Inskeep that there’s another explanation….

…Schultz cites this example of one well-known company whose pension fund has dropped significantly since the early 1990s. General Electric announced it was closing its pension plan to be more competitive. She says the company’s financial filings show that GE has not put a cent into its pension plans since the mid-1980s. Over the years, GE, like most large companies, used assets in the plans to pay for other things.
See also:
Saving For Retirement: How Much Do You Need?
Source: Jennifer Ludden, NPR, September 28, 2011

Comparing Compensation: State-Local Versus Private Sector Workers

Source: Alicia H. Munnell, Jean-Pierre Aubry, Josh Hurwitz, and Laura Quinby, Center for Retirement Research at Boston College, SLP#20, September 2011

From the abstract:
The comparability of state-local versus private sector pay has become a major issue in the wake of the financial crisis. Funded levels of public pension plans declined sharply, and governments’ ability to make required contributions has been severely constrained by the collapse of state-local budgets. Politicians everywhere are looking for ways to reduce pension costs and increase revenues. Often such efforts are couched in terms of excessively generous existing compensation – especially, current pensions. Dueling studies have appeared arguing that state-local workers are paid less or more than their private sector counterparts. Virtually all agree that wages of state-local employees are lower than for private sector workers with similar education and experience, but researchers differ on the extent to which pensions and other benefits compensate for the shortfall. This brief builds on the recent wave of studies by refining the estimates of the value of benefits.