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Government plans - state and local - misc

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[Opinion] How to Avert a Public Pension Crisis
"Today's strong economy means policymakers are not under maximal pressure: They can see the problem, but they do not yet truly feel it. That time will come, however, and if public pensions are going to survive over the long term, funding and investment practices must improve, and benefits need to be modernized to flexibly meet the needs of today's public workforce. There won't be a better time to avert the next pension crisis. And there are a few key steps that every jurisdiction should be taking." (National Affairs)
[Opinion] Cash Balance Plans Could Make a Comeback
"The Pew Research Center and the Arnold Foundation have been actively pushing cash balance plans in Kansas, Kentucky, Alabama, and Virginia. They tout cash balance plans as a solution to the problem of pension underfunding, as some magic combination of defined benefit pension plans and defined contribution 401(k)-style plans. In reality, cash balance plans are a failure for public employees and taxpayers." (National Public Pension Coalition)
Independent Contractor Agreements Do Not Guarantee Protection from CalPERS Membership and Funding Requirement
"[An Oct. 1, 2018 decision] issued by the CalPERS Board of Administration illustrates why public employers should be careful about classifying someone as an independent contractor just because they are retained through a third-party agency." (Liebert Cassidy Whitmore)
State and Local Government Contributions to Statewide Pension Plans: FY 2017 (PDF)
"[On] a dollar-weighted basis, the percentage of required contributions that was paid by public employers increased for the fifth consecutive year, while pension costs continued to grow at a slower pace than previous years.... Pension spending levels, however, vary widely among states and are actuarially sufficient for some pension plans and insufficient for others." (National Association of State Retirement Administrators [NASRA])
CalPERS Announces Increase in Average Health Care Premiums for 2020
"The CalPERS Pension and Health Benefits Committee [on June 18] approved the health plan rates for 2020, at an overall average premium increase of 4.65 percent. The action also included two health plan changes." (California Public Employees' Retirement System [CalPERS])
[Official Guidance] GASB Issues Implementation Guide on Fiduciary Activities
"[GASB] has issued a new Implementation Guide that contains questions and answers about the GASB's recently issued standards on accounting and financial reporting for fiduciary activities. Implementation Guide No. 2019-2, Fiduciary Activities, answers many questions about how to apply the provisions of GASB Statement No. 84, Fiduciary Activities." (Governmental Accounting Standards Board [GASB])
When a Pension Stabilization Trust Is 'Too Good to Be True'
"To prepare for and manage significantly increased CalPERS employer contribution rates in the coming years, California public agencies approved the establishment and funding of so-called 'pension rate stabilization trusts.' ... [M]any, if not most, agencies are setting aside funds on an 'irrevocable' basis ... exclusively for pension funding purposes, but with an 'understanding' that they can gain access to these monies for general agency purposes if needed later. Unfortunately, they can't -- and should not -- use these trusts in this way." (Best Best & Krieger LLP)
CalPERS Using More ESG in Investment Strategy
"CalPERS is stepping up its ESG investment program, despite evidence that funds based only on environmental, social and corporate governance strategies have tended to underperform.... CalPERS is working with Wellington Management and the Woods Hole Research Center on quantitative models and other analytical tools to improve the assessment of climate risk and investment outcomes." (Calpensions)
[Opinion] It's Proxy Season -- Here's Why That Matters for Public Pensions
"The two largest proxy advisory firms ... control 97% of the advisory market.... These two companies recommend proxy proposals, provide suggestions to clients about how to vote on those proposals, and in some cases, vote their clients proxy.... [T]hey have the ability to control the entire proxy process which has led them to have a duopoly on how institutional investors vote.... [T]hese firms should be held to the same fiduciary standard to which money managers are held ... [T]hey should have to register with FINRA, and the SEC should assign fiduciary responsibility to them for their fiduciary advice." (Institute for Pension Fund Integrity)
Puerto Rico Pension Deal Scales Back on Planned Cuts to Retiree Benefits
"Government retirees who receive $1,200 a month or less in benefits would be shielded from any reduction under the settlement, up from a $600 threshold previously proposed by the board ... The deal keeps 102,000 pensioners, or 61% of the total number, safe from cuts, compared with 45,000 or 25% in the earlier proposal, according to the retiree committee." (The Wall Street Journal; subscription may be required)
Potential Untapped Value in California's Public Retirement System
"State, county and municipal plan sponsors parlay their own creditworthiness when they issue Pension Obligation Bonds (POBs). If they can issue bonds with an interest ('coupon') rate that is lower than their respective retirement system's assumed rate of investment return, they can immediately lower their expected retirement costs by transferring POB proceeds into the retirement system and paying down their unfunded liabilities. And, if the retirement system's investments return more than the coupon rate, the plan sponsor will have lowered its actual retirement costs with arbitrage profits." (Reed Smith LLP)
[Opinion] State Pension Funds Shouldn't Be Captive to Politics
"In a misguided effort to fight climate change, State Sen. Liz Krueger introduced Senate bill 2126, the Fossil Fuel Divestment Act, earlier this year.... Pension funds have begun to realize that the costs of divestment are not worth the political statement.... It only hurts retirees and local economies. Fellow pensioners, retirees and taxpayers must demand separation between political opinions and public pension management. Politicians should not jeopardize our hard-earned retirement and a healthy economy because of a political agenda." [The author is the former vice chairman of the New York City Fire Department Pension Fund.] (Richard Brower, via Institute for Pension Fund Integrity)
San Diego Must Decide Whether to Continue Legal Fight Over 2012 Replacement of DB Plan with 401(k) Plan
"San Diego City Council members are expected to decide [on June 10] whether to continue fighting for 2012's controversial Proposition B pension cut measure, or give up and join labor unions seeking to invalidate the voter-approved initiative. State courts have ruled San Diego skipped key legal steps when placing the measure on the ballot, and that the city must financially compensate 4,000 employees who don't have pensions because of Proposition B." (The San Diego Union-Tribune)
Legal Protections for State Pension and Retiree Health Benefits
"[S]tate laws vary significantly with respect to: [1] The source of protection for employee retirement benefits. [2] The aspects or features of pension benefits that are protected. [3] The participants who are entitled to such protection.... And in each state, these protections vary by source, be it the state constitution, statutes, or court decisions.... Understanding how retirement benefits are protected is crucial for policymakers as they explore options to manage their state's increasing pension costs." (The Pew Charitable Trusts)
CalSTRS's Plan to Reduce Investment Management Fees
"[CalSTRS] is initiating a long-range plan to increase internal management of assets to reduce the $1.8 billion it currently pays out in external management fees ... CalSTRS has made the largest progress in internal management in its $28.3 billion fixed income portfolio where 85% of the assets class is internally managed ... The largest group of fees paid to external managers in 2017 was in private equity where $521 million was paid in management fees and carry (profit sharing) to external managers." (Pension Pulse)
[Opinion] The Coming Public Pension Crisis
"Some states like Kentucky are well past the point of no return. Illinois's public pensions are underfunded by $134 billion and some think it's far worse. Rhode Island's locally run pension plans have close to $2.5 billion in unfunded obligations. According to Pew, New Jersey's public pension system is so underfunded that it could run out of money in 12 years. Colorado could deplete its retirement fund assets by 2044 because the state lacks policies to manage volatile financial markets.... The discount rate US public pensions are using is still too high but states are reluctant to lower it for the simple reason that to do so would require increasing the contribution rate[.]" (Pension Pulse)
Do Benefit Cuts Encourage Public Employees to Leave?
"[This] analysis looks at a 2005 reform in Rhode Island that reduced benefits for some current workers. The results show that the affected employees were significantly more likely to leave the government over the next four years. Although the direct cost of hiring new workers was relatively small, governments should consider how losing skilled workers affects the quality of public services." (Center for Retirement Research at Boston College)
[Guidance Overview] Money Purchase Pension Plans with an 'Opt-In' Feature
"The glaring problem with many of the plans is that they give employees a window of up to 60 days to make their opt-in election. This violates the IRS election timing rule ... Other plans of this sort also violate the timing rule because they are established (and allow the opt-in election) after the eligible employees have already been employed for many years. This may happen in the case of a newly established plan for a specified group of employees. So what happens if you have one of these plans?" (Best Best & Krieger LLP)
Opioid Prescriptions Drop Sharply Among California State Workers
"Insurance claims for opioids ... decreased almost 19% in a single year among the 1.5 million Californians served by [CalPERS].... Most notably, doctors reduced the daily dose and duration of opioid treatment: The number of new users who were prescribed large doses dropped 85% in the first half of 2018 compared with the same period in 2017, while new users prescribed more than a week's supply dropped 73%[.]" (Kaiser Health News)
Connecticut Police Department Reverses Course, Switches Back to DB Plan
"The town of Branford and United Public Service Employees Union agreed to have the Branford Police Department switch to a DC plan in 2011 ... The switch was made after the 2008 global financial crisis and also because the town wanted to mitigate investment risks.... [P]articipants became concerned that the plan wouldn't provide sufficient benefits if they became disabled. Plus, the police union was the town's only bargaining unit not covered by a DB plan." (Pensions & Investments)
Challenges Faced by Public Pension Plan Administrators
"Administrators at the largest state-run pension programs ... say nothing compares to the challenges that have intensified over the last decade due largely to four key factors. [1] Growing structural complexity ... [2] Changing roles for administrative staffs ... [3] Participant expectations for interacting with pension programs are evolving rapidly ... [4] Ineffective legacy technology." (Governing)
Baltimore Court Ruling on Police, Firefighter Pensions Likely Faces Appeals from Unions and City Government
"Judge Julie R. Rubin ruled last year that the city breached the unions' contracts when it changed pension benefits for people who were already retired.... In Monday's ruling, she said those retirees are entitled to seek damages for the lost benefits. But she also ruled that the city could make modifications to the pension contract that extended the years of service from 20 to 25 years for employees to receive pension benefits." (The Baltimore Sun)
California Governor Boosts School Pension Cost Relief Plan
"In addition to using non-Proposition 98 state money to pay part of school rates, the governor's plan would spend $2.3 billion over four years to pay down the school district share of CalSTRS debt, saving more than $7 billion over three decades. With state aid to get over the hump of the last two years of rising CalSTRS rates, struggling school districts would then face rates, under current projections, that drop slightly and remain stable for more than two decades." (Calpensions)
[Opinion] Pew Misleads States by Pushing Cash Balance Plans
"Cash balance plans are an inefficient hybrid of defined benefit and defined contribution plans that manage to combine the worst of both plans. Cash balance plans are known for being opaque; it's often difficult for participants to know exactly how much they'll have in retirement.... Pew really made its mark promoting cash balance plans in Kentucky.... In Alabama, Pennsylvania, and Virginia, Pew has actively sought changes to traditional pensions for public employees." (National Public Pension Coalition)
Kentucky Appeals Court Dismisses Pension Fund's Hedge Fund Lawsuit
"The suit ... was filed on behalf of state taxpayers and KRS by eight public employees who are members of the retirement system. The plaintiffs claimed that the defendants enticed KRS to invest in funds of funds investment vehicles, when KRS could have earned higher returns in the stock market." (Pensions & Investments)
Report on Funded Status of Rhode Island Locally Administered Pension Plans (PDF)
50 pages. "The funded statuses for 29 of the 35 plans have increased since FY 2012.... Most municipalities met or exceeded their full ARC payments over the most recently reported 4 years. 14 plans have assumed rates of return at or below 7.0% ... [S]ignificant challenges remain: [1] The 35 local plans reviewed carry a combined unfunded liability of approximately $2.5 billion, a slight increase from last year. [2] Twenty-one of the plans are less than 60% funded ... [3] The funded statuses for 5 plans have decreased since FY 2012[.]" (Rhode Island Advisory Council on Locally Administrated Pension Plans)
District Court Holds That Public Library's Disability Plan Is Not a Governmental Plan
"The decision ... contains some analysis that could raise additional questions for other entities that maintain they are agencies or instrumentalities of a state or political subdivision of a state, and the plans they sponsor or retirement systems they participate in. Notably, this decision follows on the heels of a complaint filed by a prominent plaintiffs' law firm that a North Carolina county hospital system was not an agency or instrumentality of a county[.]" [Skornick v. Principal Financial Group, No. 18-4324 (S.D.N.Y. Apr. 18, 2019] (Groom Law Group)
Morgan Stanley Settles CalPERS/CalSTRS Lawsuit Alleging Bad Investments
"One of the world's largest investment banks has agreed to put $130 million into the nation's biggest public pension system to settle accusations it knowingly sold bad investments that caused the retirement fund for millions of workers to lose money.... From 2003-07, Morgan Stanley sold California's two largest pension systems bundles of thousands of mortgage loans. But according to [the California Attorney General], the financial giant did not adequately assess those loans to remove the risky ones and lied about it to the pension systems." (Los Angeles Times)
A Stress Test of Philadelphia's Retirement System
"As of 2017, ... the [Philadelphia] retirement system was 43 percent funded.... [This] brief assesses whether recent reforms will allow the city's pension promises to be kept in a fiscally sustainable way, whether the plan will more effectively manage the risk of market volatility and underperformance as a result, and how future retirement system costs will affect Philadelphia's budget. To illustrate the range of outcomes that cities face ... the brief also presents summary data for [Baltimore, Chicago, Houston, and Pittsburgh]." (The Pew Charitable Trusts)
Quarterly Survey of Public Pensions: Summary for 2018 Q4 (PDF)
"For the 100 largest public-employee pension systems in the country, assets (cash and investments) totaled $3,640.1 billion in the fourth quarter of 2018, decreasing by 6.1 percent from the 2018 third quarter level of $3,877.9 billion. Compared to the same quarter in 2017, assets for these major public-pension systems decreased 4.4 percent from $3,806.1 billion." (U.S. Census Bureau)
Reimbursement Rates Paid to Medical Providers: A Tug-of-War in North Carolina
"The [North Carolina State Health Plan (SHP)] is looking for ways to control healthcare cost and it has its eyes set on the reimbursement rates paid to medical providers.... [The SHP] has an estimated unfunded liability of $35 billion leading to potential insolvency by 2023. Currently, medical providers are reimbursed based on negotiated rates, which are set by insurance carriers.... The proposed plan would reimburse healthcare providers at 182% of Medicare reimbursement rates. By making this change, North Carolina could save approximately $300 million per year; and an additional $60 million per year for the approximately 720,000 members with lower out of pocket expenses." (Hill, Chesson & Woody)
2019 Report on State Retirement Systems: Funding Levels and Asset Allocation (PDF)
11 pages. "Wilshire estimates that the aggregate funded ratio was 72.2% at fiscal year-end 2018, which represents an increase of 1.7% from the end of FY 2017 creating two consecutive years of aggregate funded ratio increases.... Wilshire estimates that the aggregate Total Pension Liability (TPL) increased to $4,278 billion as of fiscal year 2018, up over three percentage points from $4,141 as of fiscal year end 2017. Despite the increase in aggregate TPL, the aggregate shortfall is estimated to have decreased by $33 billion to $1,190 billion from $1,223." (Wilshire Associates)
The Long Bull Market Has Failed to Fix Public Pensions
"There is a simple reason why pensions are in such rough shape: The amount owed to retirees is accelerating faster than assets on hand to pay those future obligations. Liabilities of major U.S. public pensions are up 64% since 2007 while assets are up 30% ... Here is how it got that way[.]" (The Wall Street Journal; subscription may be required)
Legal Privilege Issues Arising in Employee Benefit Matters (PDF)
5-page outline, from ABA EBC 2019 Midwinter Meeting. Topics: [1] Attorney-client privilege: internal investigations, fiduciary exception; [2] Accountant-client privilege; [3] Governmental privileges: Deliberative process privilege, informant privilege, Presidential communications privilege, FOIA exemptions involving privilege. (Employee Benefits Committee [EBC], American Bar Association)
Recent State Supreme Court Decisions Highlight Restrictive Approach to Vested Rights in Provisions of Public Pension Plans
"In [two recent] cases, petitioners argued that they held a vested right to a benefit no longer available under the plan.... However, both state supreme courts held that these benefits were not part of the participants' accrued benefits ... and therefore, the participants did not have any entitlement or right to receive them.... Broadly, the cases demonstrate a reluctance by state courts to expand the understanding of participants' vested rights in public pension systems beyond annuity payments." (Ice Miller LLP)
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)
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