Recently in Pensions Category

Source: Alicia H. Munnell, Thad Calabrese, Ashby Monk, and Jean-Pierre Aubry, Center for State and Local Government Excellence, Issue Brief, January 2010

From the summary:
It is risky for state and local governments to shore up pensions with such bonds except in certain circumstances.

The brief's key findings are:
* Some state and local governments issue Pension Obligation Bonds (POBs) to raise cash to cover their required pension contributions.
* POBs allow governments to avoid increasing taxes in bad times and could reduce pension costs, but they pose considerable risks.
* Those who issue POBs are often fiscally stressed and not well-positioned to handle the investment risk.

Source: National Institute on Retirement Security , January 2010

In January 2010, NIRS released new educational materials contained in "The Pension Resource Guide." The Guide is comprised of the following educational materials:

* A Pension Primer
* Three Modules (Download Pension Basics Module here, Why Pensions Matter Module here, and Strong Public Pensions for Today and Tomorrow Module here.)
* Fact Sheets (Download Pension Basics Fact Sheet here, Why Pensions Matter Fact Sheet here, and Strong Public Pensions for Today and Tomorrow Fact Sheet here, Who Has A Pension Fact Sheet here.)
* Key Stats
* a Glossary
* a PowerPoint
* a FAQ

Source: Olivia S. Mitchell, WP2010-02, Pension Research Council, January 2010

From the abstract:
Managing retirement risk has become extraordinarily difficult in this era of financial turmoil, global interlinkages, and global population aging. It is particularly fraught since consumers must now engage in long-term contracts with themselves, employers, financial institutions, and governments, regarding the future of retirement financing. Moreover, these agreements will need to remain in force extraordinarily long, for fifty or even one hundred years into the future. This note reviews what institutions and instruments that have a successful track record in retirement risk management over such a long time horizon

Source: Hans J. Blommestein, Pascal Janssen, Niels Kortleve, Juan Yermo, Rotman International Journal of Pension Management, Vol. 2, No. 2, Fall 2009

From the abstract:
This article analyzes the tradeoffs between uncertainties in contributions and benefits embedded in different pension arrangements. The two key criteria for evaluating the risk-sharing characteristics of a private pension plan from the perspective of the plan member are the funding ratio (ratio of assets to liabilities) and the replacement rate (ratio of benefits to salaries). The stochastic simulations performed (considering financial risks only) show that hybrid plans (those in between traditional defined benefit and individual defined contribution) can offer efficient and sustainable forms of risk-sharing. The appeal of different hybrid plans depends very much on the regulatory, social, and economic environment. In situations where funding excesses can be efficiently and fairly apportioned, conditional indexation plans appear to have the greatest potential as sustainable forms of risk-sharing. However, the appropriate design of hybrid plans requires careful consideration of the relative pension plan risks that can be borne by working and retired individuals.

Source: Monique Morrissey, Retirement USA, Conference Report, 2009

Even before the current recession, retirement income security had become a major national concern, as companies increasingly shifted from traditional pensions to do-it-yourself savings plans. Since the fall of 2008, the faltering stock market and dwindling 401(k) accounts have turned a major concern into a crisis, highlighting the weaknesses in our current system.

While each group involved in Retirement USA is actively working to strengthen current pension and 401(k) programs for today's workers, they are convinced that it is critical to start now to lay the foundation for a new system to supplement Social Security.

By combining key elements of traditional pensions with those of 401(k)-type plans, and adding new ideas, the Retirement USA principles provide a framework for a system in which employers, workers, and the government share the responsibility for retirement income security.

Source: Mark Brenner, Labor Notes, no. 367, October 2009

Nobody wants to admit it, but the next casualty of the Wall Street meltdown will probably be your golden years. For years corporations have been trying to choke the life out of traditional pensions, working hard to get out from under the risk--and the cost--of providing for their retirees. Between last year's credit crunch and changes to federal pension laws, they may get their wish.
See also:
- Defined-Benefits Squeeze
Source: Labor Notes, no. 367, October 2009
- State and City Pensions Drenched in Red
Source: Labor Notes, no. 367, October 2009

Source: James J. Rizzo, Government Finance Review, Vol. 25 no. 4, August 2009
(subscription required)

The ongoing discussion over how pension liabilities should be measured and accounted for - financial economics versus the conventional method - has serious implications for virtually every government employer.

Source: Jay M. Goldstone, Government Finance Review, Vol. 25 no. 4, August 2009
(subscription required)

The lessons learned by City of San Diego in instituting pension reforms can help other jurisdictions that may have promised more benefits in the past than they can now afford.

Source: Ashby H.B. Monk Issue Brief, Center for Retirement Research, IB#9-21, October 2009

From the abstract:
Over the past half century, employer-sponsored defined benefit (DB) pensions have been crucial sources of retirement income and security. However, the popularity of DB pensions in the private sector has dwindled, and competitive pressures may drive DB plans from the private sector altogether. Significantly, this burden is not only a US phenomenon, as UK private plan sponsors are also struggling to manage their DB pension commitments. Nonetheless, a fundamental difference of opinion exists between UK and US policymakers about how to address the decline of the DB system.

In the United Kingdom, DB stakeholders have accepted the plans' decline as inevitable and are now promoting alternative mechanisms to shore up retirement security. For example, in the Pensions Act of 2008, the UK government mandated that employers enroll eligible employees into a workplace pension and created a new second pillar pension institution, the Personal Accounts Delivery Authority (PADA), to facilitate the new policy. In addition, UK policymakers, and indeed most DB stakeholders, have endorsed the use of pension buyouts as a way to manage the decline of this once important institution. A buyout allows firms to pay an insurance company a fee to take over the assets and liabilities of their plan, thereby freeing them from their DB obligations. As such, UK policymakers perceive buyouts to be part of the process of unwinding an unsustainable institution, and most see the rising popularity of pension buyouts as a direct response to the increasingly burdensome nature of DB pensions...
See also:
Working Paper

Source: Zach Patton, Governing, Vol. 23 no. 1, October 2009

Disclosing jumbo pension checks might reform public retirement systems--or just embarrass them.