Category Archives: Retirement

How Have Pension Cuts Affected Public Sector Competitiveness?

Source: Laura D. Quinby, Geoffrey T. Sanzenbacher, and Jean-Pierre Aubry, ons for the 2014 improvements, according to their, Issue Brief, April 9, 2018

Summary:
State and local data from 2005 to 2014 show the impact pension cuts have on the ability of governments to recruit, retain, and retire talented employees.

Key findings:
One of the central findings is that, especially for new hires, the implementation of pension reform hampered governments’ ability to attract new employees. This is important to note in an environment where governments are experiencing increases in retirements and are competing for talent at a time when unemployment rates, especially for those with college degrees, are relatively low.

Tending to the Nest Egg: Plan Could Help Nonprofit Workers Build Retirement Security

Source: Monique Ching, Massachusetts Budget and Policy Center, May 17, 2018

Many Massachusetts workers are unable to save enough money for themselves to retire on. This is partly because setting up and managing retirement plans is often too expensive for small and employers. In late 2017, Massachusetts launched a state-administered 401(k) plan that can begin to address some of these challenges. Small nonprofits, with 20 employees or fewer, can participate in the plan.

I Work with Mark Janus. Here’s How He Benefits from a Strong Union.

Source: Donnie Killen, Labor Notes, May 11, 2018

Like everyone else in the labor movement, I’m nervously awaiting the Supreme Court ruling in Janus v. AFSCME Council 31, which would weaken public sector unions by letting workers receive the benefits of representation without contributing toward the cost.

But I’ve got a unique vantage point: I work in the same building as the plaintiff, Mark Janus.

We’re both child support specialists for the state of Illinois, where we do accounting on child support cases. I do this work because it’s fulfilling to help kids and single parents get the resources they need to support themselves.

What convinced Mr. Janus to join this destructive lawsuit? Your guess is as good as mine. I do know it’s much bigger than him. He’s the public face, but this case is backed by a network of billionaires and corporate front groups like the National Right-to-Work Foundation.

But the truth is, even Mark Janus himself benefits from union representation. Here are a few of the ways:

1. Without our union, Mr. Janus’s job would probably have been outsourced by now. ….
2. Mr. Janus has received $17,000 in union-negotiated raises. ….
3. The public—including the parents and kids Mr. Janus serves—has access to resources like childcare that our union has fought to defend. ….
4. Our union blocked the employer from doubling the cost of Mr. Janus’s health benefits. ….
5. We make sure Mr. Janus’s office is warm in the winter and cool in the summer. ….
6. Thanks to our union, Mr. Janus will retire with a pension. ….
7. Mr. Janus can get sick and still have a job when he comes back. ….
8. Our union ensured that Mr. Janus could be fairly hired, regardless of his politics. ….

The Real Reason Behind Recent Teacher Strikes — And Why They’re Likely to Continue

Source: Katherine Barrett & Richard Greene, Governing, May 10, 2018

It’s about much more than low salaries.

…. In 26 states, average teacher salaries, adjusted for inflation, were less in 2016 than they were at the end of the 20th century, according to the National Center for Education Statistics. Two years ago, an Economic Policy Institute (EPI) report documented the dive in weekly wages for teachers compared to other workers with comparable education requirements. In 2015, an average teacher made 17 percent less than comparable workers in salary. Back in 1994, the salary gap was 1.8 percent. ….

…. Teachers in Oklahoma still worry about the dangers to student education of going to a four-day school week in some districts. In Kentucky, there’s been no money for teacher professional development, extended school services have been cut and schools haven’t been able to spend money on textbooks.
Arizona school districts will still struggle to fund all the needs that have piled up. Years of cuts have, for example, left the school transportation budget severely underfunded. ….

Related:
Where Teacher Salaries Most Lag Behind Private Sector
Source: Mike Maciag, Governing, April 30, 2018

States where teachers are protesting have among the largest pay discrepancies when compared with similarly educated private-sector workers.

When the City Goes Broke: Pensions, Retirees, and Municipal Bankruptcies

Source: Kevin M. Lewis, Congressional Research Service, CRS Legal Sidebar, LSB10116, April 10, 2018

In recent years, a significant number of cities, towns, and other municipalities in the United States have found themselves increasingly unable to pay their debts. In order to offer municipalities relief from many types of debts they cannot repay, Chapter 9 of the Bankruptcy Code authorizes certain municipalities to file for bankruptcy. However, filing for bankruptcy may adversely affect the municipality’s creditors, especially beneficiaries of underfunded municipal retirement plans (who, along with bondholders, often hold “the lion’s share” of a municipality’s financial obligations). Because a number of municipalities face a “dramatic and growing shortfall in public pension funds,” many “firefighters, teachers, police officers, and other public employees” who purportedly have “a right to pension benefits at retirement” face a significant risk that their pensions will ultimately not be fully repaid. The fact that public pensions, unlike their private counterparts, are neither subject to the “vesting and funding rules imposed by” the Employee Retirement Income Security Act of 1974 nor “protected by the federal pension guarantee program operated by the Pension Benefit Guaranty Corporation” could, according to some commentators, further exacerbate that risk. Moreover, because courts presiding over municipal bankruptcy cases have generally been “amenable to modifying pension debt in bankruptcy,” retirees’ pension benefits may potentially be significantly curtailed when a municipality declares bankruptcy. Although many Chapter 9 debtors have ultimately opted not to cut pensions “for political or practical reasons,” courts and commentators generally accept that, under certain circumstances, municipalities “have the legal ability to shed pension debt” in bankruptcy if they so choose.

This Sidebar first explains how, under current bankruptcy law, Chapter 9 debtors have significant freedom to modify their outstanding pension obligations through the bankruptcy process. The Sidebar then explores proposals to alter the legal principles governing the adjustment of municipal pensions in bankruptcy….

Retirement Planning Decisions: Choices Between Defined Benefit and Defined Contribution Plans

Source: Susannah Bruns Ali, Howard A. Frank, The American Review of Public Administration, OnlineFirst, Published April 12, 2018
(subscription required)

From the abstract:
As states move toward offering defined contribution retirement plans as an alternative or addition to traditional defined benefit pensions, they need to consider the preferences and long-term consequences for different groups of employees. This study looks at which plan employees choose when given the option of either a defined contribution or defined benefit plan. The strongest driver of that choice is education level where the most educated prefer defined contribution plans and the least educated stay in defined benefit plans. A unique contribution of this study is that we include region of origin as a study and determine that cultural differences influence plan selection. The study also explores the role of sex, age, and tenure. Challenging other studies on financial planning, these findings indicate that sex and age are not significant factors. This research was conducted using data from more than 4,000 employees from Florida International University and an interview with HR professionals. By understanding retirement preferences in a more nuanced way, we can better craft our approaches to retirement security and financial literacy training in public sector organizations.

Understanding Decisions in State Pension Systems: A System Framework

Source: Gang Chen, The American Review of Public Administration, Vol. 48 no. 3, April 2018
(subscription required)

From the abstract:
State governments establish pension systems to provide retirement benefits to public employees. State governments as sponsors, state legislatures as policy makers, and public-sector unions as representatives of public employees may exert considerable influence over the decisions made in pension systems. This study applies a system framework to examine these influences. It focuses on four decisions in pension systems: benefits, employer contributions, employee contributions, and the asset smoothing period. The findings show that changes in the short- and long-term financial conditions of a state government have different influences on pension decisions, and that legislatures and public employee unions play important roles that affect these decisions.

The investment industry threatens state plans to help workers save – States wrestle with impending retirement crisis as pensions disappear

Source: Jared Bennett, Center for Public Integrity, April 2, 2018

…..Since 2015, Oregon and four other states ­­— California, Illinois, Connecticut and Maryland — have set up these so-called “auto-IRA” programs overseen by the state. Nine more states are considering similar programs this year, among them New York, Missouri and Pennsylvania.

But the investment industry is standing in the way, aggressively deploying trade groups and raising the specter of legal threats to stop the proliferation of these plans. Behemoths such as the National Association of Insurance and Financial Advisors and the U.S. Chamber of Commerce oppose the plans because they argue the private sector already provides options for workers like Kono. But many small businesses, such as Annastasia Salon, find the private plans too expensive.

The industry’s lobbying efforts look to be winning, as proposed state-run retirement plans are languishing in statehouses around the country…..

2017 Workplace Benefits Report

Source: Bank of America Merrill Lynch, ARKRNPFQ, 2017

From the summary:
Bank of America Merrill Lynch works with employers across the country to help provide employee education, guidance and retirement plan solutions that help employees take charge of their financial lives. As part of this ongoing effort, we conduct an annual study — the Workplace Benefits Report (WBR) — to talk to employers and employees about retirement readiness and larger financial wellness topics. Our current report examines how employees feel about their financial situation and the role employers play in supporting their overall financial wellness.

On behalf of Bank of America Merrill Lynch, Boston Research Technologies conducted an online survey with a national sample of 1,242 employees between September 22, 2016 to October 7, 2016. Understanding the ever-evolving retirement landscape, monitoring and keeping abreast of these key indicators and opinions, helps us empower employers to stay ahead of the curve while helping meet the varied needs of their employees.

Related:
/2017_WBRInfographic_R6_060217.pdf”>Infographic Presentation
Millennials Supplement
Healthcare Supplement

The perk your employer is most likely to give you, and it’s not a raise
Source: Maria Lamagna, Marketwatch, March 27, 2018