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News Items, by Subject

Government plans - state and local - misc

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Illinois Pension Buyout Participation Rate Higher Than Expected, Early Numbers Show
"Since it launched in December, at least 200 new retirees took the deal, more than expected.... The program is designed to save the state about $380 million per year. Neighboring Missouri introduced a similar program for their state employees in 2017.... 22 percent of retirees there took the buyout ... Missouri offers a 60 percent match while Illinois is offering 70 percent." (WNIJ)
Vallejo No Longer Bankrupt But Budget Gap Grows
"Vallejo has taken two steps to reduce pension costs. An extra $6.5 million payment was made to CalPERS in fiscal 2013-14. Two years ago a $1 million payment was made to a new trust that sets aside money to help pay future pension costs. And yet, Vallejo's police and firefighter pension rate is among the top two dozen listed by CalPERS. It was 28.1 percent of pay in 2008, more than doubled to 68 percent of pay this fiscal year, increases to 78 percent in July, and in 2024 is an estimated 90 percent of pay." (Calpensions)
The Los Angeles Teacher Strike Has a Huge Problem: Pensions
"The United Teachers of Los Angeles and the Los Angeles Unified School District both want teachers to be paid more, class sizes to be reduced, and more support staff hired. But these items are expensive and run headlong into the fiscal wall created by big employee benefit promises to retirees. Pensions and retiree healthcare commitments now threaten the district with insolvency if it accedes to the union position." (Manhattan Institute)
Retirement Choices by State and Local Public Sector Employees: The Role of Eligibility and Financial Incentives
"[This study models] the probability of retirement as a function of pension wealth at early and normal retirement eligibility and Social Security coverage in the public sector job.... [B]ecoming eligible for early retirement, or receiving an early-out offer, significantly increases the probability of retiring.... These findings suggest that state legislative action to affect retirement decisions and reduce future pension costs may be most effective operating through plan eligibility rules and early-out incentives." (National Bureau of Economic Research [NBER]; purchase required for full document)
[Opinion] Public Pension Fund Crisis Has a Start Date
"A simple extrapolation of the lines suggests a crisis around 2023, when pension fund assets are wiped out. That's an extrapolation, not a prediction. Market returns and political actions could move the date a few years in either direction. Moreover, action will be forced before assets go to zero. We don't know when or how or what will happen, but it won't depend on average investment returns over the next few decades." (Bloomberg)
Pensionomics 2018: Measuring the Economic Impact of Defined Benefit Pension Expenditures
"Each dollar paid out in pension benefits supported $2.13 in total economic output nationally. Each taxpayer dollar contributed to state and local pensions supported $8.48 in total output nationally. This represents the leverage afforded by robust long-term investment returns and shared funding responsibility by employers and employees. The largest employment impacts occurred in the real estate, food services, health care and retail trade sectors." (National Institute on Retirement Security [NIRS])
[Opinion] Divestment: The Impact of Political Decisions on Public Pensions (PDF)
11 pages. " Divestment is rooted in arguments based on global urgency, political necessity, or morality. This is inherently against the fiduciary responsibility of public pension fund managers.... Divestment as a means of creating change is ineffective.... Expert financial management firms disagree on divestment strategies.... There are real, expensive costs associated with divestment which directly harmed public pensions." (Institute for Pension Fund Integrity)
Risk Sharing in Public Retirement Plans (PDF)
64 pages. "Shared risk plans are intended to increase the predictability of financial outcomes resulting from both positive and negative events affecting plans, sponsors and beneficiaries.... A primary consideration for any retirement plan sponsor is which types of risk, and in what proportion, are most appropriately borne by individuals, and which risks are best borne collectively, by institutions." (National Association of State Retirement Administrators [NASRA])
DB Pensions vs. 401(k)s: A Study of Teacher Retirement Programs in Six States
"Eight out of ten educators serving in the six states studied can expect to collect pension benefits that are greater in value than what they could receive under an idealized 401(k)-type plan. The study also finds that the typical teacher in these states that offer pensions will serve 25 years in the same state, while two out of three educators will teach for at least 20 years." (National Institute on Retirement Security [NIRS])
California Governor Cut Retirement Debt Bigger Than Pensions
"[As] Gov. Brown leaves office, ending what he called the 'anomaly' of retirees paying less for health care than current workers is part of one of his accomplishments ... The state no longer pays for Medicare Part B. And five more years of service are needed to receive state payment of retiree health care premiums, beginning with 50 percent after 15 years and increasing 5 percent a year to 100 percent after 25 years.... [T]he major part of Brown's retiree health care reform applies to workers hired before the reform, not just new hires. All workers are beginning to contribute to a pension-like investment fund to help pay future retiree health care costs." (Calpensions)
[Official Guidance] Text of GASB Exposure Draft: Implementation Guide -- Fiduciary Activities
37 pages. Includes amendments to existing Q&As, along with new Q&As covering: [1] Identifying fiduciary activities; ... [2] Reporting fiduciary activities in fiduciary funds ... [3] Statement of fiduciary net position ... [4] Statement of changes in fiduciary net position. (Governmental Accounting Standards Board [GASB])
Significant Reforms to State Retirement Systems (PDF)
98 pages. "Since 2009, nearly every state passed meaningful reform to one, or more, of its pension plans. Although the global market crash and recession affected all plans, differing plan designs, budgets, and legal frameworks across the country defied a single solution; instead, each state met its challenges with tailored changes specific to its unique circumstances." (National Association of State Retirement Administrators [NASRA])
A Curious Lace in the Other Shoe About to Drop on State Balance Sheets
"Looking across the 50 states, and using the state governments' own actuarial and accounting assumptions, total unfunded retiree health care obligations run about 80% as high as total unfunded pension obligations. Retiree health care debt actually runs higher than pension debt in 12 of the 50 states.... What characterizes the top ten ('Stronger Credit Rating') states, compared to the bottom ten ('Stronger Taxpayer Burden') states? ... The states with 'Stronger Credit Ratings' have very high OPEB (retiree health care) debt per taxpayer, compared to the 'Stronger Taxpayer Burden' states." (Truth in Accounting)
Deep-in-Debt CalSTRS Also Has $9.8 Billion Surplus
"The main CalSTRS pension fund is seriously underfunded, and school district pension costs are more than doubling, biting deep into classroom budgets. But a CalSTRS inflation-protection fund has a growing $9.8 billion surplus and an eye-popping positive cash flow.... [T]he add-on inflation protection is a separate special fund ... [which is] paid for only by the state ... Step-by-step, inflation protection grew from 58.4 percent to 85 percent of original purchasing power." (Calpensions)
Kentucky Supreme Court Nixes Move to Hybrid Pension Plan for Teachers
"In April, Republican Gov. Matt Bevin signed a law that moved all new teacher hires into a hybrid pension plan. The law also restricted how teachers used sick days to calculate their retirement benefits and changed how the state pays off its pension debt.... [T]he state's highest court ... ruled that lawmakers cannot take a bill close to final passage and replace it with an unrelated bill without voting on it three times over three separate days as the Constitution requires." [Bevin v. Kentucky, Nos. 2018-SC-419-TGE, 2018-SC-421-TGE, 2018-CA-1200-MR (Ky. Dec. 13, 2018)] (NBC News)
ERISA Class Action Litigation over Fees in Health and Welfare Plans
"Although the primary issue is whether these plans were improperly designated as governmental entity plans ... the key issue for health-plan fiduciaries is whether Atrium retained a costly, affiliated entity as a third-party administrator for its health plan and failed to ensure that participants paid only 'reasonable' fees for services, co-insurance and deductibles." [Shore v. Charlotte-Mecklenburg Hospital Authority (d/b/a Atrium, f/k/a Carolinas Healthcare System), No. 18-961 (M.D.N.C. complaint filed Nov. 19, 2018)] (McDermott Will & Emery)
Annuity Pricing in Public Pension Plans: Importance of Interest Rates
"This study examines the distribution options of 85 large public retirement plans covering general state employees, teachers, and local government employees.... [I]nterest rates used to price annuities vary considerably across the plans. As a result, retirees with the same monthly benefit if a single life benefit is chosen will have substantially different monthly benefits if they select the joint and survivor annuity offered by their retirement plan." (National Bureau of Economic Research [NBER])
Governmental Plan Status is Key Issue in Pending Lawsuit
"The Complaint identifies the following reasons why Atrium's plans do not meet the governmental plan definition: [1] Atrium's board is not publicly nominated or elected; [2] Atrium's board is not controlled by a state, political subdivision, or any other governmental entity; [3] No state, political subdivision, or any other governmental entity has the powers and interests of an owner with respect to Atrium; [4] Atrium's employees are not treated as employees of any state, political subdivision, or any other government entity; [5] Atrium receives no funding from the state or any political subdivision; and [6] Atrium does not possess the sovereign powers of a state, political subdivision, or any other governmental entity." [Shore v. Charlotte-Mecklenburg Hospital Authority (d/b/a Atrium, f/k/a Carolinas Healthcare System), No. 18-961 (M.D.N.C. complaint filed Nov. 19, 2018)] (Ice Miller LLP)
California Supreme Court Hears First Challenge to Public Employee Pension Reform
"The state Supreme Court, with four similar cases on the backburner, gave few signs during oral arguments on a labor-union challenge to Gov. Brown's pension reform yesterday that it's ready to take on the 'California Rule' preventing pension cuts." (Calpensions)
Supreme Court Hears Oral Argument on Differing State Tax Treatment of Federal/State Government Retirement Benefits
"On December 3, 2018, the United States Supreme Court heard oral argument in Dawson v. Steager, a case addressing West Virginia's personal income tax regime, which exempts state employee retirement benefits without offering the same exemption to federal employee retirement benefits.... At oral argument, several justices expressed skepticism about the West Virginia scheme.... The decision is expected to have implications for state statutes that distinguish between federal and state government employee retirement benefits." (Kilpatrick Townsend)
California Pension Reform Goes Before State High Court
"The high stakes case tests the so-called California Rule, the legal precedent that forbids California government agencies from reducing retirement benefits without offering workers some kind of compensation to offset a loss in income. If the court sides with [Gov. Jerry Brown], unions worry that future city managers and governors will be emboldened to cut benefits they promised to their workers." (San Jose Mercury News)
Unions Sue Puerto Rico Government Over Worker Retirement Accounts
"The action was filed in Puerto Rico's Title III bankruptcy case under the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa). It seeks declaratory and injunctive relief for the workers, 'based on the commonwealth's admission that it failed to implement the provisions of Puerto Rico Law 106 of 2017, a law that was supposed to create and protect individual defined-contribution retirement accounts for thousands of union-represented workers'[.]" (Caribbean Business)
Michigan High Court to Rule on Changes to Retiree Health Benefits
"In oral arguments Nov. 19, retirees will ask the state's highest court to stand apart from federal courts that have found retiree health benefits can be changed or cut in the absence of "vesting language" in a labor contract. In the other corner are Michigan towns, cities, counties, and the state bar, which argue federal rules favoring governments should apply in Michigan as well. The ruling could greatly affect how tightly Michigan's 1,800 local governments will be held to roughly $10.13 billion in unfunded liabilities for retiree health-care benefits. A July 2017 state report found those liabilities exceeded by nearly $3 billion the local unfunded pension liabilities." (Bloomberg BNA)
Whither the American Pension?
"The sudden erosion of pension benefits for 1,100 former employees of the old St. Clare's Hospital in Schenectady is a scenario that isn't supposed to happen.... [ERISA] contained a religious exemption that was later expanded to hospitals operated by religious groups, and St. Clare's took advantage of that.... But what about the rest of America? Two generations of American workers increasingly don't have to worry about pension plan failures because fewer and fewer workplaces offer pensions." (The Daily Gazette)
Transitioning American Public Pension Plans to a Shared Risk Model Through Prepackaged Chapter 9 Plans of Debt Adjustment (PDF)
"This paper proposes a paradigm shift by creating a new, world class shared risk pension plan and transitioning through prepackaged Chapter 9 Plans of Debt Adjustment for all persons employed by, or retired from, local governments and school districts. Direct state employees and retirees could transition only voluntarily through incentives/disincentives.... In most states, a constitutional amendment to facilitate the transitions would be required." (W. Gordon Hamlin, Jr. & Mary Pat Campbell)
Public-Sector Employees Want Customized Benefits
"Millennials ... currently comprise only 25% of [the public sector] workforce.... 80% of Millennials find career development, advancement opportunities and on-the-job training important and say these factors would increase their loyalty towards their employer. Only 29% of public-sector Millennial employees have access to financial planning tools, whereas 42% of total Millennials employees have such access." (PLANSPONSOR)
2019 PEPRA Compensation Limits
"The 2019 PEPRA compensation limits are $124,180 for Social Security members and $149,016 for non-Social Security members. These limits are the maximum pay that a California public agency can recognize in a defined benefit plan for PEPRA members, i.e. those first hired by a public employer in 2013 or later." (Van Iwaarden Associates)
Arizona Voters Approve Constitutional Amendment Allowing Changes to State Employee Pensions
"The proposition will now allow certain benefits of retirement plans to be adjusted by the state. These changes mean that the old pension system for corrections officer retirees and elected official retirees' will be permanently replaced with a system that adjusts the retirees' cost-of-living benefits in accordance with the economy rather than constantly keeping retiree benefit increases at 4 percent." (KGUN 9)
2019 Planning for Governmental Retirement Plan Operations
"In addition to the key items noted [in this article], plan sponsors may want to perform an annual 'checkup' (i.e., a review of operational practices and fiduciary responsibilities) to address plan expenses, design considerations, and investments." (Buck)
Government Pension Plans in Focus: Is the Plan Actuarially Sound? (PDF)
14 pages. "This article examines how the simple phrase 'actuarially sound' can be a source of confusion for government entity stakeholders, and it provides more specific questions to follow the first critical follow-up question: In what context?" (Findley)
Contest Launched to Develop New Type of Retirement Plan for the Public Sector
"The Golub Center for Finance and Policy (GCFP) at the Massachusetts Institute of Technology (MIT) is launching a contest to generate strategic proposals aimed at enhancing retirement plans covering millions of public sector workers across the US. A prize pool of $20,000 will be distributed to the winners who propose the most well-reasoned, prudent and implementable strategies.... Submissions from students, academics, investment advisory professionals, pension fund managers, as well as from experts in asset-liability management are particularly welcome." (Golub Center for Finance and Policy [GCFP] at the Massachusetts Institute of Technology [MIT])
[Opinion] Public Wealth Maximization: A New Framework for Fiduciary Duties in Public Funds
"[E]conomic logic suggests that public pension fund trustees owe their duties to the public collectively.... [In] practice, individual pension fund claimants function more like senior creditors than the residual claimants that are the typical recipients of fiduciary duties, [and] the public -- and current and future taxpayers specifically -- are the true residual risk bearers for public pension funds." (Paul Rose, in Illinois Law Review)
Using Actuarial Experience in Managing a Public Pension Plan
"During the Great Recession (2008-2010), plan participants' retirement patterns shifted to later retirement, particularly when there were changes in benefits or coverage under a post-retirement health benefits plan.... Participants are living longer in retirement, but not as much as originally expected.... Monitoring changes in demographic, investment and economic trends is important, because the actuarial model should use the best estimates of future experience (the actuarial assumptions) to ensure integrity in the plan's financial measurements." (Findley)
[Opinion] How a Gang of Hedge Funders Strip-Mined Kentucky's Public Pensions
"[In] Kentucky, as in most states, it's perfectly legal for hedge funds or private equity firms to employ placement agents -- so long as they aren't caught violating a fairly recent rule that bars them from giving campaign donations or financial benefits directly to public officials while those officials are in a position to send hundreds of millions of dollars to their clients." (The Intercept)
[Opinion] Strip-Mining Public Pensions?
"[A]ll the reforms in the world in US public pensions are worthless unless you first get the governance right and get politicians out of managing them in any way, shape or form.... They need alternatives but they need a new approach to lower overall fees via more co-investments and to do that, they need to get the governance right to attract talent to their public pensions." (Pension Pulse)
[Opinion] Online Calculator Shows State of U.S. Public Pension Plans
"[The] calculator ... aggregates the data from each state's Comprehensive Annual Financial Report to display ... information that allows taxpayers, pensioners, and policymakers to see the impact of changing the core assumptions, even by just 1%.... As you lower the assumed rate of return, you will increase the level of unfunded liabilities. Users can watch as the bar graph skyrockets as the module moves closer and closer to 2%." (Institute for Pension Fund Integrity)
California Public Employees Vote Against CalPERS Investment Activism
"The California Public Employees' Retirement System this month said no thank you to pension-fund activism. Government workers unseated Priya Mathur, the sitting CalPERS president. She was defeated by Jason Perez, a police-union official who criticized Ms. Mathur's focus on environmental, social and governance investing, or ESG. Mr. Perez emphasizes the agency's fiduciary duty to maximize investor returns." (Paul S. Atkins in The Wall Street Journal; subscription may be required)
Contributing Real Property: Has Connecticut Found a Solution to Underfunded Public Pensions?
"The state's inventory of real assets on its books, such as office buildings, parking lots, raw land or highway right-of-ways, identifies nearly 7,000 properties.... Transferring those assets from the state's balance sheet to the pension funds investment portfolio recategorizes their value from book to current market.... [T]he pensions get a boost in asset values and the state gets a lower pension liability with no cash outlay." (Forbes)
What Percentage of Public Pension Income Is From Investment Returns? From Contributions?
"[T]here's no one perfect percentage the mix should be. It's demographically dependent as to what the mix of contributions-to-investment returns it should be.... The issue for CalPERS is that its contribution amounts as a percentage of active payroll is precipitously climbing, for a variety of reasons." (STUMP)
Employee Contributions to Public Pension Plans (PDF)
12 pages, Oct. 2018. "[N]early all employees of state and local government are required to share in the cost of their retirement benefit. Employee contributions typically are set as a percentage of salary by statute or by the retirement board.... Reforms made in the wake of the 2008‑09 market decline included higher employee contribution rates in many states. This issue brief examines employee contribution plan designs, policies and recent trends." (National Association of State Retirement Administrators [NASRA])
Videos from Pepperdine Forum on Public Pensions Held September 25, 2018
"Some notable video excerpts: ... [1] Mortality and discount rate fraud ... [2] Illinois situation ... [3] How do you fix a problem like Connecticut? ... [4] Illinois can pay and, if not, there are Pension Obligation Bonds and asset transfers." (Burypensions)
Navigating Complex Financial Decisions at Retirement: Evidence from Annuity Choices in Public Sector Pensions
"Choices regarding the disposition of wealth at retirement can have substantial implications for retirement income security.... Using combined administrative records and survey data, [the authors] explore the role of individual and household characteristics as well as risk preferences, time preferences, and financial literacy.... Comparing retirees who chose different annuities, ... these groups of retirees report very different levels of well-being in retirement." (National Bureau of Economic Research [NBER]; purchase required for full document)
Public Pension Reform: A 'Top-Down' Roadmap to Success (PDF)
"[Because] there are numerous stakeholders with various objectives, ... clearly defining the 'goal' is complicated. In the public sector, there is rarely one decision maker.... A 'top-down' approach ... determines an overall structure and magnitude of change, including the development of a contribution strategy, and then details the specific design modifications to achieve those objectives has proven to be very effective." (GRS)
Real Assets' Role in Public Pension Portfolios
"Core real assets have hybrid characteristics, providing the opportunity for a stable, volatility-reducing income stream and potential equity-like upside from price appreciation.... [An] allocation addition of core real assets as small as 5% can significantly enhance portfolio outcomes." (J.P. Morgan Asset Management)
SOA Exposure Draft: Pub-2010 Public Retirement Plans Mortality Tables
"The Society of Actuaries' Retirement Plans Experience Committee (RPEC) has released an exposure draft of the Pub-2010 Public Retirement Plans Mortality Tables. The primary focus of this study was a comprehensive review of recent mortality experience of public retirement plans in the United States.... The SOA solicits comments on this exposure draft. Comments should be ... [submitted] by October 31, 2018." (Society of Actuaries)
State Public Pension Funds' Investment Practices and Performance: 2016 Data Update
"61 percent of plan portfolios in 2006 were made up primarily of equities, with only 11 percent allocated to alternative investments. A decade later, allocations to alternative investments had more than doubled to 26 percent of the average plan portfolio.... Ten-year total investment returns for the 44 funds in our study that report performance net of fees as of June 30, 2016, ranged from 3.8 percent to 6.8 percent, with an average yield of 5.5 percent. Given that the average target return for these plans was 7.5 percent, the long-term variability is significant." (The Pew Charitable Trusts)
[Opinion] Policing Pensions: How Far Some Public Unions Will Go to Protect Their Contracts
"The League of California Cities recently reported that their members expect pension costs to rise by at least 50 percent over just the next half-decade. Cities employing police officers and firefighters will face the highest burdens: for every $100 spent in salary on current employees, they will soon have to shell out at least $54 to the state's pension fund, CalPERS.... Police unions have used bareknuckle methods to fight pension reform, not just in Costa Mesa, but across California." (City Journal)
CalPERS Agencies Should Track and Verify Employee Hours
"[C]ommon employment situations that require careful tracking of hours for CalPERS purposes and an explanation of the consequences for working beyond established thresholds: Out-of-class appointments ... Retired annuitants ... Less than full-time or part-time/temporary employees." (Liebert Cassidy Whitmore)
[Opinion] ESG Investing for Public Pensions: Does It Add Financial Value? (PDF)
10 pages. "ESG investment measures have become increasingly politicized through institutional investors and pension funds' growing reliance on proxy advisory firms. These advisory firms have introduced political agendas for corporate governance decision-making, leaving corporations and pension funds to operate at the whims of advisory firms with serious conflicts of interest that disregard investor value.... ESG investments should be made when they add value to a fund. When such investments will not improve the financial performance of the fund, or the decision to invest in them is based on political motives, they should be forgone." (Institute for Pension Fund Integrity)
A Survey of Public Plan Maturity Measures (PDF)
"A new actuarial standard of practice on the assessment and disclosure of risk (ASOP 51) requires actuaries to identify and assess significant risks to pension plans and to disclose plan maturity measures that are important to understanding those risks.... Understanding plan maturity and how it affects the ability of pension plans to tolerate risk is essential to understanding how they are affected differently by investment return volatility, other economic conditions, improvements in longevity and other demographic changes." (Cheiron)
Collective Investment Trusts Gaining Ground in Governmental DC Plans
"Last year, 59% of plans responding to the NAGDCA survey offered collective investment trusts vs. 57% in 2016 and 54% in 2015.... The survey also found a slightly lower offering of mutual funds among government DC plans, falling to 82% last year vs. 84% in 2016 vs. 88% in 2015.... The survey also found that passive investments are playing an increasing role in plan assets, growing to 33% last year vs. 28% in 2016 and 22% in 2015." (Pensions & Investments)
Biggest U.S. Public Pension Looks to China for New Investment Chief
"An official with China's foreign-exchange regulator is the lead candidate to become next investment chief of the largest U.S. public pension fund ... [CalPERS] has offered the job to Ben Meng of China's State Administration of Foreign Exchange ... The agency is in charge of China's more than $3 trillion in foreign reserves. Mr. Meng previously worked for the California pension fund earlier this decade." (The Wall Street Journal; subscription may be required)
[Opinion] The Politics of Public Pension Boards (PDF)
12 pages. "Political appointees to pension boards are responsive to constituencies -- such as local industry or the governor's budget -- that steer them away from acting in the long-term interest of the pension fund's fiscal integrity. But the representatives of public employees and their unions on these boards are also tempted to trade pension savings tomorrow for higher salaries today.... The only lasting solution is to replace state-administered, defined benefit pensions with defined contribution pensions, which, by definition, cannot be underfunded. In a defined contribution plan, employee contributions, combined with government employer contributions, would be managed by major money-management firms that are not exposed to political interference." (Manhattan Institute)
Washington Metropolitan Area Transit Authority: Assessing Fiscal Risks and Improving Workforce Management
"[T]he amount WMATA was required to contribute to its pension plans increased by an annual average of about 19 percent during [2006 through 2017]. Due to their relative size, proportion of retirees compared to active members, and investment decisions, these pension plans pose significant risk to WMATA's financial operations ... to an extent that might jeopardize its ability to provide some transit service." [GAO-18-643, Sept. 10, 2018] (U.S. Government Accountability Office [GAO])
Ninth Circuit Revives Implied Contract Claims Concerning Retiree Heath Care Benefit
"Contract claims asserted by retirees with regard to a county's reduction in the Grant Benefit paid to retirees to defray the cost of health care premiums were revived by the Ninth Circuit.... [B]ecause employers are not required to provide post-retirement benefits at all, the county did not violate the California Fair Employment and Housing Act (FEHA) by treating retirees as a separate force and making cost calculations accordingly, taking into account the age distribution of the retiree group as a whole." [Harris v. County of Orange, No. 13-56061 (9th Cir. Sept. 5, 2018)] (Wolters Kluwer; free registration required)
Emerging-Market Tremors Rattle Tennessee's Public Pensions
"The troubles hammering developing economies ... has exposed the difficulties facing U.S. public pensions, many of which have embraced riskier assets in recent years hoping to boost returns. The Tennessee Consolidated Retirement System, which manages $50 billion in pension assets for the state's public employees, has almost $2 billion invested in ETFs devoted to some of the hardest-hit markets such as South Africa, Indonesia and Turkey. Those investments have lost $243 million since the start of the year[.]" (The Wall Street Journal; subscription may be required)
Why California Public Agencies Need to 'Monitor' Full-Time, Temporary Employees
"[M]any California public agencies are forced to fill workforce gaps with temporary employees from staffing agencies.... Misconception No. 1: Workers obtained from 'temp' or staffing agencies are always the responsibility of those agencies.... Misconception No. 2: 'Temporary-assignment' workers can be permanently excluded from CalPERS." (Best Best & Krieger LLP)
Tontine Pensions Could Solve the Chronic Underfunding of State and Local Pension Plans (PDF)
20 pages. "While replacing the CalSTRS traditional defined benefit plan with a tontine pension would do nothing to reduce that $101.6 billion obligation, it would ensure that California would never again have to worry about underfunding attributable to future benefit accruals. One approach would be for California to freeze its current CalSTRS defined benefit plan and add a new tontine pension for all future benefit accruals." (Society of Actuaries)
New Jersey Lawmakers Try to Wrangle Pension Problem
"Pension and health-care costs will eat up nearly a quarter of the state's $45 billion budget by fiscal year 2023, fueling a $3 billion deficit ... One of [the] proposals shifts new state employees and those employed for less than five years of service to a hybrid pension and 401(k)-style plan. Another moves public employees to less expensive health-care plans and requires future retirees to pay more for health care." (The Wall Street Journal; subscription may be required)
[Opinion] America's Broken Public Retirement Systems?
"These are structural solutions to shore up these plans over the long run: [1] Eliminate contribution holidays ... no matter how well funded the plans are. [2] Stop using rosy investment forecasts or 20-year inflation averages to discount future liabilities.... [3] Adopt conditional inflation protection so the plan's risk is equally shared among active and retired workers.... [4] [A]void shifting public sector workers to a defined-contribution plan at all cost." (Pension Pulse)
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