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News Items, by Subject

Government plans - state and local - misc


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Reforming the Social Security WEP Exposes Weaknesses in State and Local Pensions
"The Windfall Elimination Provision (WEP) reduces Social Security benefits for retirees who also draw pension benefits from government employment not covered by Social Security. The Equal Treatment of Public Servants Act, a recently introduced congressional bill, would change how benefits are reduced.... Under the proposal, benefits for certain workers could be reduced by more than 30 percent and in some cases, by more than the amount of their noncovered pension benefit. The largest reductions would affect those who work in government employment for shorter periods, the same workers who already get the least benefit from their state and local government pension plans." (Urban Institute)
State and Local Government Spending on Public Employee Retirement Systems (PDF)
"In the wake of the 2008-09 market decline, nearly every state and many cities have taken steps to improve the financial condition of their retirement plans and to reduce costs.... This update provides figures for public pension contributions as a percentage of state and local government direct general spending for FY 2016, and projects a rate of spending on pensions on an aggregate basis for FY2017." (National Association of State Retirement Administrators [NASRA])
U.S. Supreme Court Won't Intervene in San Diego Pension Modification Case
"The U.S. Supreme Court [denial of the petition for certiorari leaves] in place a California Supreme Court ruling that the city skipped a key legal step when the cuts were placed on the ballot in 2012. The decision means state courts will resolve the case, including a decision about how to financially compensate 4,000 city employees who don't have pensions because of the voter-approved measure, which was called Proposition B." [Boling v. Public Employment Relations Bd., No. S242034 (Cal. Aug. 2, 2018); cert. denied Mar. 18, 2019] ] (The San Diego Union-Tribune)
California Supreme Court Rules No Vested Right to Airtime Purchases; Leaves California Rule Intact
"The Court initially concluded that the Contracts Clause generally does not prohibit the prospective reduction or elimination of statutory terms and conditions of public employment. The Court recognized only two exceptions: [1] when the statute or the circumstances of its enactment clearly evince legislative intent to create a contract right, and [2] when certain benefits of public employees, primarily pension benefits, are protected as an implied contract right." [Cal Fire Local 2881 v. CalPERS, No. S239958 (Cal. Mar. 4, 2019)] (Hanson Bridgett LLP)
Texas Supreme Court Affirms Cuts to Future Public Pension Benefit Accruals
"[T]he court held that the term 'benefits' as used in ... the Texas Constitution did not apply to future benefits, meaning that the formula to calculate future interest under the [deferred retirement option plan (DROP)] was not a protected benefit.... Because the amendment to the plan had no impact on funds deposited before the amendments became effective, no Section 66 violation existed." [Eddington v. Dallas Police and Fire Pension System, No. 17-0058 (Tex. Mar. 8, 2019)] (Husch Blackwell)
California Supreme Court Issues Opinion in Cal Fire Case
"[T]he Court made clear that the March 4 ruling was not intended to alter or affect the continued application of the California Rule.... [A]lthough the Court recognized that a constitutionally protected contractual right (a vested right under the California Rule) may be implied from legislation in appropriated circumstances, it chose not to articulate what the California Rule covers or protects -- rather it explained why the right to purchase airtime was not protected[.]" [Cal Fire Local 2881 v. CalPERS, No. S239958 (Cal. Mar. 4, 2019)] (Best Best & Krieger LLP)
Texas Supreme Court Says Changes to Local Pension Plan Were Constitutional
"The Texas Supreme Court affirmed an earlier state appeals court ruling that changes to the [Deferred Retirement Option Plan(DROP)]interest rate and distribution policy at the Dallas Police & Fire Pension System that were approved in 2014 were constitutional." [Eddington v. Dallas Police and Fire Pension System, No. 17-0058 (Tex. Mar. 8, 2019)] (Pensions & Investments)
First Public Sector-Specific Mortality Tables Released (PDF)
"There is wide variation in the mortality tables used by public sector plans. A broad analysis of recent experience shows clear mortality differences among participants in different job categories in the public sector. Teachers have significantly higher life expectancies than other employment classifications at most ages." (Segal Consulting)
New Pension-Cut Court Decisions in California Begin with Little Change
"The ruling was a rare pension court loss for unions, led by Cal Fire Local 2881. While awaiting the next case, lawyers are analyzing the 45-page ruling ... for any hint of clarifying or reshaping the California Rule. Among the main points in the ruling is that public employment is ordinarily statutory, rather than contractual, and can be modified by the governing body." [Cal Fire Local 2881 v. CalPERS, No. S239958 (Cal. Mar. 4, 2019)] (Calpensions)
California Supreme Court Holds That Air Time Is Not a Vested Right, But Passes on Reexamining 'California Rule'
"The California Supreme Court issued a long-awaited decision ... addressing whether the Legislature's elimination of 'air time' as an optional benefit for members of CalPERS unconstitutionally impaired a vested contractual right. Holding that the air time benefit was not entitled to constitutional protection, the Court took a pass on reviewing a much bigger question: Whether the so-called 'California Rule' for modifying pension benefits should remain intact." [Cal Fire Local 2881 v. CalPERS, No. S239958 (Cal. Mar. 4, 2019)] (Liebert Cassidy Whitmore)
Public Agency Participation in ERISA Multiemployer Pension Plans
"Because practically all Taft-Hartley plans originated among unions and employers in the private sector, they are subject to ERISA and participants' benefits are, to some extent, 'insured' by the [PBGC].... What surprises many cities and special districts that participate in these trusts is that, under certain circumstances, the trusts can and must require the participating employers to contribute additional sums -- above and beyond what is called for in the applicable [Memorandum of Understanding]." (Best Best & Krieger LLP)
[Opinion] What is Financial Stress Testing and Why Does It Matter?
"[Pew Research Center is] known for traveling to states and pushing for mandatory stress testing.... [M]ost public pension plans already conduct financial stress tests.... Pew's method of stress testing focuses on downside events only: times when the pension plan's investment returns fall significantly below expectations. This effectively rigs the outcome because the plan is going to look bad if you are only considering worst case scenarios." (National Public Pension Coalition)
ERISA-Exempt Government Health Plans Under Attack by Plaintiffs' Bar
"On November 19, 2018, a group of current and former employees filed a lawsuit against The Charlotte-Mecklenburg Hospital Authority. The hospital, doing business as Atrium Health, managed several employee benefit plans for workers at the Hospital under the ERISA 'governmental entity' exemption. The lawsuit alleges that Atrium does not satisfy the requirements for that exemption." (Hall Benefits Law)
[Opinion] Corporate Giveaways and the Funding of Public Pensions
"Public pensions are proven economic engines, generating $1.2 trillion in economic output in 2016 and supporting 7.5 million jobs.... In Kentucky, [a] state with a long history of underfunding public pension plans, the state actually gives away more each year through tax expenditures than it collects in tax revenue. [The] annual cost of funding pensions in Kentucky is only two-thirds of the cost of those corporate giveaways." (National Public Pension Coalition)
Under Attack: The California Rule on Right to Future Benefit Accruals
"[The California Supreme Court] justices did not ask about the heart of the California Rule; whether alternative benefits must be provided whenever a vested right is impaired. Given the other cases pending before the Supreme Court and the nature of the justices' questions in [Cal Fire Local 2881 v. CalPERS], the court appeared to signal that it will likely issue a narrow ruling related to airtime itself, allowing major components of the California Rule to be argued in later cases." (Liebert Cassidy Whitmore)
Public School Teachers Strike for Higher Pay Amid Growing Retirement, Benefit Costs
"While average inflation-adjusted teacher salaries have been relatively stagnant since 1990, benefits costs have risen from 16.8 percent of expenditures in 1990 to 23 percent of today's much larger expenditure base.... Almost every state increased teachers' retirement benefits in the booming 1990s. But the additional promises were not accompanied by responsible funding plans. Overfunded at the turn of the millennium, by 2003, teacher pension plans were collectively short by $235 billion. By 2009, pension debt had more than doubled, to $584 billion." (USA TODAY)
[Opinion] Pritzker's Plan for Illinois Pensions: 'Clever' Tricks
"The big problem with the 'pay more later' idea -- which is 'we can't pay much more right now, but because of growth/inflation/whatever, we'll be able to pay more later' in longer form -- is that it doesn't necessarily become easier to pay more in the future. Ask Detroit and Puerto Rico, which saw substantial population drops in small periods of time, in a vicious cycle that lead to more-and-more unaffordable debt payments." (STUMP)
Public Pension Plan Sponsors Struggle to Contribute Sufficiently to Plans
"Between 2005 and 2016, employer contributions to 133 large state and municipal pension plans more than doubled from $42.4 billion to $88.1 billion; however, during that same period, the unfunded liabilities of these plans grew 245% from $290 billion in 2005 to $1.0 trillion in 2016 ... Most of the plans studied received insufficient contributions to reduce their unfunded liabilities[.]" (PLANSPONSOR; free registration required)
Public Pension Plan Investment Return Assumptions (PDF)
"[A]lthough the average nominal public pension fund investment return has been declining, because the average rate of assumed inflation has been dropping more quickly, the average real rate of return has risen, from 4.21 percent in FY02 to 4.56 percent in FY17. One factor ... is public pension funds' higher allocations to alternative assets, particularly to private equities, which usually have a higher expected return than other asset classes." (National Association of State Retirement Administrators [NASRA])
CalPERS Sued to Identify Retirees with Disability
"Transparent California, a website listing the pay and pension of state and local government employees, has filed a lawsuit to force CalPERS to identify retiree pensions with a one-word label as 'service' or 'disability.'... The Transparent California suit, in an example of how publicly identifying retirement could help curb fraud, cited a CalPERS news release on a hotline tip that led to the court-ordered recovery of $203,876 from a former state hospital worker in Coalinga." (Calpensions)
Average Funding Ratio for Public Pension Plans Increases in 2018
"Results of the 2018 NCPERS Public Retirement Systems Study showed that the average funding ratio for all plans that responded rose to 72.6% in 2018, from 71.4% in 2017. For pension plans that participated both years, the average funding ratio jumped to 72.2%.... [O]ne-year investment returns averaged 13.4% for all pension plans reporting in 2018, well above the 7.8% average return reported in 2017." (Pensions & Investments)
Public Employees Living Longer, Deepening State Pension Crisis
"In the private sector, defined-benefit pensions must follow mortality tables issued by the federal government. No such strictures bind public pensions.... Longer lives for public employees will mean higher costs, and not just for pension plans. Many state and local governments promise to pay for the health care of their retired workers, but few have enough money set aside to do so." (City Journal)
Public Plans Receive Their Own Mortality Tables
"Officially known as the Pub-2010 Public Retirement Plans Mortality Tables Report, it is the first look at public-sector mortality distinct from the private sector. The findings are based on the experience of 35 public systems covering 78 retirement plans between 2008 and 2013, broken down by three job categories: general employees, public safety employees and teachers. The tables also suggest a correlation between higher income and lower mortality." (Pensions & Investments)
Financial Literacy Programs for Local Government Employees (PDF)
27 pages. "[This report] combines: [1] Background on the local government workforce; [2] A review of the literature on what is known about financial literacy; [3] Data from a survey of elected officials and human resources directors from local governments across the United States; [4] Insights gained from discussions with city managers and budget officers; [5] Recommendations for practitioners, focusing on program topic and mode, tailoring programs to diverse groups ... and assessing results." (Center for State & Local Government Excellence)
[Opinion] No, Pension Obligation Bonds Aren't a Form of 'Refinancing'
"The city owes pension liabilities.... In principle, they could indeed 'pay off' the benefits, if they purchased annuities for retirees, or if they offered lump sum buyouts to plan participants. And corporations are doing this increasingly often ... [P]ublic pensions are, with few exceptions, valued using the expected return on assets as their valuation interest rate, rather than, as with corporate pensions, a bond rate.... When a city does the same math, the cost of buying annuities is considerably higher than the (artificially) lower liability valuation. And workers would be foolish to accept a lump sum at lower value." (Forbes)
Public Pensions Pour More Money Into Private Equity
"Private equity mandates accounted for 27 percent of new allocations made by U.S. and U.K. pension funds in 2018, an uptick from 25 percent last year ... On an absolute basis, mandates awarded to private equity firms increased dramatically year-over-year, from a total of 580 commitments in 2017 to 954 allocations last year." (Institutional Investor)
CalSTRS Wants to Double Co-Investments
"CalSTRS's overall private equity returns for the one-year period ending March 31 totaled 15.5%, the largest return of any asset class. CalSTRS currently has 8.1% of its overall portfolio devoted to private equity, but its long-term target is 13%." (Chief Investment Officer [CIO])
[Opinion] Are U.S. Public Pensions Cooked?
"[To] 'stress test' the funded status of US public pensions or any pension for that matter, you need to look at various scenarios where interest rates decline marginally or precipitously over the next two or three years.... [A] lot of US public pensions have not done this or if they have, they're not sharing their results because it will scare the bejesus out of their members." (Pension Pulse)
State Hybrid Retirement Plans (PDF)
12 pages. "Despite variability among these plans, most contain the core features known to promote retirement security: mandatory participation, shared financing between employers and employees, pooled assets invested by professionals, targeted income replacement with survivor and disability protection, and a benefit that cannot be outlived." (National Association of State Retirement Administrators [NASRA])
2018 Benefits Strategy and Benchmarking Survey: Public Entity Industry Addendum (PDF)
"In 2018, 56% of public sector employers did not increase cost sharing; of those that did, higher premiums was the most common (35%) means of doing so. Notably, employees do not contribute to individual coverage premiums at 39% of public entities, although the number drops to 11% for family coverage." (Gallagher)
SOA's New Mortality Tables May Not Affect Large Public Retirement Systems
"The new mortality tables may have a bigger impact on small public retirement systems which do not have much credible experience which actuaries can use to adjust the mortality tables. Nonetheless, the actual impact of these new tables on liabilities and on contributions will vary depending on the extent to which each system has already adjusted the mortality assumptions from the previous tables." (Cheiron)
2018 Public Pension Funding Study
"As of June 30, 2018, the aggregate funded ratio is estimated to be 72.1%, with plan assets earning slightly more than anticipated by the plans' interest rate assumptions ... Adoption of more conservative assumptions added $73 billion to reported liabilities; plan changes shaved off $14 billion ... The aggregate Total Pension Liability reported at the last fiscal year-ends was $4.93 trillion, growing from $4.72 trillion as of the prior fiscal year-ends. We estimate that the Total Pension Liability has since passed the $5 trillion mark as of June 30, 2018." (Milliman)
Largest Public Sector Pension Obligations Likely for Teachers
"SOA found the largest pension obligations likely to be for teachers than other job categories, when comparing the same benefit amount. Teachers have the longest age-65 life expectancy, and more deferred-to-62 annuity values, compared to public safety and general employee categories. The SOA tables also suggest a correlation between higher income and lower mortality." (Pensions & Investments)
Do Pension Cuts for Current Employees Increase Separation?
"The analysis takes advantage of a 2005 reform to the Employees' Retirement System of Rhode Island (ERSRI) that dramatically reduced the generosity of benefits for current workers.... the pension cut caused a 2.4-percentage-point increase in the rate of separation, implying an elasticity of labor supply with respect to pension benefits of around 0.25. Rhode Island teachers were significantly less responsive to the benefit cut than other occupations[.]" (Center for Retirement Research at Boston College)
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)
 
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