Category Archives: Pensions

Selected State Pension and Retirement Legislation Enacted in 2008

Source: National Conference on Public Employee Retirement Systems, 2008

This report was compiled for the National Conference on Public Employee Retirement Systems by staff of the National Conference of State Legislatures (NCSL). This report summarizes selected state pensions and retirement legislation enacted through July 7, 2008. It builds upon a search of the legislation of all the states that held regular or special sessions from January through July 2008. The Arkansas, Montana, Nevada, North Dakota, Oregon and Texas legislatures did not convene in regular session in 2008. Some states continue in session at this time. This report will be updated late in 2008 to reflect actions that may occur after July 7. The legislation summarized below was compiled from several sources. The report is based upon comprehensive surveys of legislation Statenet provided NCSL. That foundation was augmented with legislation and legislative summaries reported on various legislatures’ and state retirement systems’ Websites, and summaries legislative staff provided NCSL.

The Effects of Recent Turmoil in Financial Markets on Retirement Security

Source: Peter R. Orszag, Congressional Budget Office, Testimony before the Committee on Education and Labor U.S. House of Representatives, October 7, 2008

The turmoil in financial markets has affected many aspects of the economy, including pensions. The most direct effect on pensions is through the prices of financial assets such as corporate equities and bonds. The Standard & Poor’s 500 stock market index, for example, has fallen by more than 25 percent over the past year as the outlook for the economy and corporate profits has worsened.

Because the majority of pension assets are held in equities, drops in stock prices have had a significant adverse effect on pension plans. Data from the Federal Reserve suggest that the decline in the value of financial assets cost pension funds (private-sector and public-sector combined) roughly $1 trillion–almost 10 percent of their assets–from the second quarter of 2007 to the second quarter of 2008 (the latest period for which data are available), and there has been a significant further drop in asset prices since then.
See also:

Pension Sponsorship and Participation: Summary of Recent Trends

Source: Patrick Purcell, Congressional Research Service; Domestic Social Policy Division, September 2008

From the abstract:
According to the Census Bureau’s Current Population Survey (CPS), the number of private-sector workers between the ages of 25 and 64 whose employer sponsored a retirement plan rose from 51.2 million in 2006 to 53.5 million in 2007. The number of private-sector workers who participated in employer-sponsored retirement plans rose from 42.0 million in 2006 to 44.1 million in 2007. The proportion of 25 to 64 year-old workers in the private sector who participated in employer-sponsored retirement plans increased from 43.2% in 2006 to 45.1% in 2007. Between 2000 and 2007, the number of private-sector workers between the ages of 25 and 64 who participated in employer-sponsored retirement plans fell from 46 million to 44 million. The percentage of workers who participated in an employer-sponsored plan fell from 50.3% in 2000 to 45.1% in 2007.

Pensions in Peril: Are State Officials Risking Public Employee Retirement Benefits by Playing Global Warming Politics?

Source: Steve Milloy and Thomas Borelli, National Center for Public Policy Research, #575, September 2008

From the press release:
Already at-risk public employee pension funds are being placed at further risk by state officials who are lobbying for global warming regulation and by state officials who are ignoring the risks posed by such regulation, says a new report.

“We concluded that many state officials are placing public employee pension fund assets at risk by lobbying for global warming regulation that is expected to harm the economy and stock market,” said report co-author Steve Milloy. “These state officials, many of whose pension funds are already in financial trouble, may be breaching the fiduciary duties owed to public employees and retirees by playing global warming politics,” Milloy added.

“Our report shows that public employees and retirees should be concerned about state officials who might be trying to advance their personal political agendas at the expense of retired public employees,” said co-author Tom Borelli. “And let’s not forget that taxpayers would likely be forced to make up for any pension fund shortfalls,” Borelli added.

Distributional Analysis of Pension and Social Security Reforms: Alternative Approaches and a Report on an Expert Panel Meeting

Source: Eric Toder, Urban Institute, September 16, 2008

From the summary:
In April 2008, the Urban Institute convened an expert panel of researchers inside and outside of government agencies to discuss how best to perform distributional analyses of proposals to reform Social Security and private pensions. The panel discussed key technical issues, including how to measure the baseline income distribution and characterize current policies, how to address changes that alter the timing of taxes and benefits, and how to measure and report gains and losses from policy interventions. The group revealed diverse viewpoints, but we conclude that current methods used in recent UI research fall within the range of reasonable alternatives.

More Than One-Fourth Of Plan Sponsors Lack A Funding Policy For Their Defined Benefit Plans

Source: Mercer, September 22, 2008

Turbulent economic conditions expose need for stronger risk management.

Economic turbulence, demands for increased financial disclosure, changes in financial reporting and increased pension funding requirements are combining to make defined benefit pension plan risks more obvious, and requiring more proactive management by plan sponsors. Yet, an analysis of the funding policies of more than 250 defined benefit plans conducted by Mercer reveals that 27 percent fail to develop and then adhere to a formal, well-documented funding policy. Altogether, 51 percent of sponsors surveyed fund only the minimum amount required by law, either by default or intentionally.

Public Pensions and Market Value of Liabilities

Source: Keith Brainard, National Association of State Retirement Administrators, White Paper,
July 21, 2008

This paper explores the use of market value of liabilities (MVL) in the context of public pension plans, including whether or not public pensions should be required to disclose this figure; the source of efforts to require this disclosure; and the effects this disclosure might have. The paper presents evidence that MVL is based on a corporate finance model that is poorly suited to the unique environment of public sector pensions.

Defined Benefit Pension Plans: Guidance Needed to Better Inform Plans of the Challenges and Risks of Investing in Hedge Funds and Private Equity

Source: Government Accountability Office, GAO-08-692, August 14, 2008

Millions of retired Americans rely on defined benefit pension plans for their financial well-being. Recent reports have noted that some plans are investing in ‘alternative’ investments such as hedge funds and private equity funds. This has raised concerns, given that these two types of investments have qualified for exemptions from federal regulations, and could present more risk to retirement assets than traditional investments.

New Publications and Internet Sites

Source: EBRI Employee Benefit Research Institute Notes, Vol. 29 no. 5, May 2008

Web Documents:
2008 Health Care for America Survey: Summary of Findings
Changes in Family Health Insurance Coverage for Small and Large Firm Workers and Dependents: Evidence from 1995 to 2005
Consumer-Driven Impact Study
Current Strategies to Employ and Retain Older Workers
Employer “Pay or Play” Requirements–Key State and Local Health Care Reform Initiatives
EP Determination Letter Resource Guide [for retirement plan sponsors]
FMLA Practices and Perspectives: A Survey of WorldatWork Members
Hewitt FMLA Resources for Employers
Improvement in Multiemployer Pension Plans’ Withdrawal Liability Funded Ratios Continues
MetLife Sixth Annual Study of Employee Benefits Trends–Findings from the National Survey of Employers and Employees
Milliman 2008 Pension Funding Study: 2007 Gains Reversed in First Quarter of 2008
Retirement Security for Women: Progress To Date and Policies for Tomorrow
The Role of IRAs in U.S. Households’ Saving for Retirement
Social Security: An Essential Asset and Insurance Protection for All
Summary of the Employee Retirement Income Security Act (ERISA)