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All News > State and Local Government Plans

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Public Pension Funding Index, 3rd Quarter 2020
Milliman Link to more items from this source
Dec. 18, 2020

"The third quarter (Q3) of 2020 continued the upward trend in asset returns for public pensions, reflecting continued strong growth in markets following the initial COVID-19-induced economic impact in Q1. Q3 investment gains propelled the estimated funded status of the 100 largest U.S. public pension plans from 70.7% at the end of June 2020 to 72.6% at the end of September 2020[.]"

Tags: Funding of DB Plans  •  State and Local Government Plans

The Impact of the COVID-19 Pandemic on Public Pension Plans (PDF)
American Academy of Actuaries Link to more items from this source
Dec. 15, 2020

"The pandemic has the potential to affect plan contributions, investment returns, and demographic experience. The severity of the impact ... is likely to vary significantly from plan to plan depending on the economic disruption in the plan's geographic region and the exposure of the plan's members to COVID-19.... [C]ontinued budgetary pressures -- combined with persistent low interest rates that may force plans to reduce expected investment returns -- could make it even more difficult for plan sponsors to make the needed level of contributions."

Tags: Funding of DB Plans  •  State and Local Government Plans

Some Governmental Plans Have Special Compensation Limit
PLANSPONSOR; free registration may be required Link to more items from this source
Dec. 8, 2020

"If permitted in the plan document, a governmental plan can apply an older, higher indexed 401(a)(17) limit that was in place back on July 1, 1993, but ONLY for any individuals who first became a participant in the plan prior to the first day of the first plan year beginning after the earlier of: [1] the last day of the plan year by which a plan amendment to reflect the 401(a)(17) limit reduction made by section 13212 of OBRA '93 was both adopted and effective; or [2] December 31, 1995."

Tags: Retirement Plan Design  •  State and Local Government Plans

Illinois Pension Funding Crisis Looming, Tax Measure Failure Hurts Prospects
Institute for Pension Fund Integrity [IPFI] Link to more items from this source
[Opinion]
Dec. 8, 2020

"Rather than raising taxes on the wealthiest to cover the pension deficit, the state will now have to look toward alternative measures, including broader tax increases across the board as well as cutting future pension earnings for new workers. One of the paths to reform would be a complete overhaul: a constitutional amendment to cut already-promised benefits. The state should also consider taking smaller measures, including considering more stable investments and using more realistic investment predictions."

Tags: Funding of DB Plans  •  Local Regulation  •  Retirement Plan Policy  •  State and Local Government Plans

2020 Public Pension Funding Study
Milliman Link to more items from this source
Dec. 4, 2020

"June 30, 2019, is the measurement date for three-quarters of the plans in the 2020 study. The 12 months since that date were marked by extreme market volatility amid the onset of the COVID-19 pandemic.... [The authors] estimate that aggregate plan assets rose just slightly from $3.82 trillion as of the most recent fiscal year-ends to $3.84 trillion as of June 30, 2020."

Tags: Funding of DB Plans  •  State and Local Government Plans

Corporate Pension Plans Funded Status, November 2020 (PDF)
NEPC Link to more items from this source
Dec. 4, 2020

"Based on NEPC's hypothetical open- and frozen-pension plans, the funded status of the total-return plan went up by 2.6%, while the LDI-focused plan saw an increase of 3.8% as long-duration fixed income outperformed on the back of falling credit yields."

Tags: Funding of DB Plans  •  State and Local Government Plans

Internal vs. External Management for State and Local Pension Plans
Center for Retirement Research at Boston College Link to more items from this source
Nov. 24, 2020

"This study explores how the number of managers affects fees and after-fee returns, controlling for plan size, asset allocation, and extent of external management. The results suggest that a significant reduction in the number of managers could reduce fees somewhat, but, in terms of after-fee returns, it matters who gets cut."

Tags: Retirement Plan Investments  •  State and Local Government Plans

Why Public Pensions Are Cheaper Than Other Retirement Plans Like 401(k)s
National Public Pension Coalition Link to more items from this source
[Opinion]
Nov. 19, 2020

"[C]losing public pension plans and moving all newly hired public employees into defined-contribution plans like a 401(k) or cash balance hybrid plans ... can increase costs.... [1] Closing a defined-benefit plan can increase unfunded liabilities.... [2] Public pensions are cheaper to administer than defined-contribution plans.... [3] Closing a defined-benefit plan can create higher public employee turnover, leading to increased training costs."

Tags: Retirement Plan Design  •  State and Local Government Plans

Do State and Local Government Employees Save Outside of Their Defined Benefit Plans When They Need To?
Center for Retirement Research at Boston College Link to more items from this source
Nov. 13, 2020

"Employees whose pensions provide less income are more likely to participate in a supplemental DC plan, but the effect is small. Members of poorly funded pension plans are not more likely to participate in supplemental plans than members of well-funded plans. Employees without Social Security coverage are not compensating with greater participation in supplemental plans."

Tags: State and Local Government Plans

Tighter Municipal Budgets Shrink Retiree Health Benefits
The Wall Street Journal; subscription may be required Link to more items from this source
Nov. 9, 2020

"For all 50 states combined, revenue declines for 2020 and 2021 could reach 13% cumulatively, according to Moody's Analytics projections, while the average cost of an employer health-care plan for an individual increased 4% in 2020 to $7,470, according to the Kaiser Family Foundation nonprofit."

Tags: Retiree Health Plans  •  State and Local Government Plans

Constitutional Limits on Public Pension Reform: New Directions in Law and Legal Reasoning
T. Leigh Anenson, Linda Barkacs, and Jennifer Gershberg, via SSRN Link to more items from this source
Oct. 30, 2020

"Faced with alarming actuarial deficits, state and local legislatures are enacting comprehensive reforms to avoid insolvency. Government employees, however, are challenging these reforms under the Contract Clause.... [An] overwhelming majority of barriers to pension reform are judge-made, meaning that changing case outcomes would not require a constitutional amendment.... [R]eforms have generally been upheld even in those states in which existing doctrine is more protective of employee pensions. These results have practical implications by suggesting that governments can expand the scope of reforms."

Tags: Retirement Plan Design  •  Retirement Plan Policy  •  State and Local Government Plans

Editor's Pick ESG Investing and Public Pensions: An Update
Center for Retirement Research at Boston College Link to more items from this source
Oct. 27, 2020

"Public pension plans have engaged in social investing since the 1970s in response to state mandates. More recently, the plans themselves have embraced a 'new' form of investing that incorporates environmental, social, and governance (ESG) factors. ESG investing is based on the notion that taking account of non-financial factors will lead to better investment outcomes. Some also believe ESG investing can further socially beneficial practices. The evidence suggests, however, that social investing: [1] yields lower returns; and [2] is not effective at achieving social goals. Hence, any form of social investing is not appropriate for public pension funds."

Tags: Retirement Plan Investments - ESG  •  State and Local Government Plans

Public Pensions and COVID-19: Confronting a Crisis, and Opportunities for Reform (PDF)
Institute for Pension Fund Integrity [IPFI] Link to more items from this source
[Opinion]
Oct. 27, 2020

15 pages. "The market downturn of the last several months has exacerbated the funding shortfalls facing many public pensions funds across the country ... In the short- and medium-term, pension funds will have increased difficulties meeting their required contributions and other financial obligations, and many may also face a liquidity crisis.... [P]ublic pension fund managers are now in a position to implement long-needed reforms to their investment, management, and public policy strategies."

Tags: Funding of DB Plans  •  State and Local Government Plans

Our Public Pensions in Crisis
Carrie McCabe, in Forbes Link to more items from this source
Oct. 19, 2020

"At $1.24 trillion, the fifty-state pension funding gap -- the difference between a state retirement system's assets and its liabilities -- improved slightly in 2018 with strong investment performance. However, the Pew report estimates that the aggregate pension funding gap has since increased by an additional $500 billion through March 2020 based on market pandemic losses."

Tags: Funding of DB Plans  •  State and Local Government Plans

Pensions for State and Local Government Workers Not Covered by Social Security: Do Benefits Meet Federal Standards?
Laura Quinby, Jean-Pierre Aubry and Alicia H. Munnell, via SSRN Link to more items from this source
Oct. 8, 2020

"This article examines data from a variety of sources to assess whether state and local governments currently satisfy the federal standards for retirement plan sufficiency and whether the standards ensure benefits equivalent to those from Social Security."

Tags: Retirement Plan Design  •  State and Local Government Plans

Summary of the Quarterly Survey of Public Pensions for 2020: Q2
U.S. Census Bureau Link to more items from this source
Oct. 7, 2020

"For the 100 largest public-employee pension systems in the country, assets (cash and investments) totaled $4,094.2 billion in the second quarter of 2020, increasing by 7.6 percent from the first quarter of the 2020 level of $3,803.6 billion. Compared to the same quarter in 2019, assets for these major public-pension systems increased 3.7 percent from $3,946.9 billion."

Tags: Funding of DB Plans  •  State and Local Government Plans

GASB Aims to Mitigate Costs of Fiduciary Activities Standard
Moss Adams LLP Link to more items from this source
[Guidance Overview]
Oct. 6, 2020

"The new standard intends to reduce the financial-reporting complexities and ease the overall implementation costs of GASB 84, Fiduciary Activities -- specifically when evaluating defined contribution pension and defined contribution post-employment benefit plans ... Implementation of GASB 97 is expected to minimize the number of DC plans that meet the criteria for reporting as a fiduciary component unit within a sponsoring government's annual financial report."

Tags: Accounting  •  Fiduciary Duties  •  State and Local Government Plans

Disparate Private Equity Fees Are Erasing Public Pension Gains
Institute for Pension Fund Integrity [IPFI] Link to more items from this source
[Opinion]
Oct. 5, 2020

"The practice of investing increasing amounts into private equity, however, is purely a result of poor long term fund management. Managers feel the need to invest in riskier options to produce return estimates that look more favorable for the fund to make up for losses. In this case, the drive for investing in riskier private equity options also creates losses through exorbitant fees."

Tags: Retirement Plan Investments  •  State and Local Government Plans

New Jersey to Make Largest Pension Contribution in State History
The Pew Charitable Trusts Link to more items from this source
Oct. 2, 2020

"[T]he state will make a $4.7 billion payment before the next budget year ends June 30, 2021.... New Jersey pushed out the end of fiscal 2020 from June 30 to Sept. 30 as it navigated the impact of revenue fluctuations caused by the COVID-19 pandemic.... [Governor Murphy] said he will rely on a combination of spending cuts, tax increases, and borrowing to cover a $6 billion state budget shortfall -- and will keep his pledge to boost pension payments."

Tags: Funding of DB Plans  •  State and Local Government Plans

California Law Blocks Cities from Replacing Some CalPERS Pensions with 401(k) Plans
The Sacramento Bee Link to more items from this source
Sept. 30, 2020

"A Southern California city's attempt to offer 401(k)-style retirement plans to firefighters has led to a new law prohibiting similar efforts to exclude public workers from CalPERS pensions. Gov. Gavin Newsom this week signed legislation preventing cities and counties from excluding groups of employees from CalPERS pensions when they offer them for other groups."

Tags: Retirement Plan Design  •  State and Local Government Plans

Editor's Pick Employee Contributions to Public Pension Plans (PDF)
National Association of State Retirement Administrators [NASRA] Link to more items from this source
Sept. 30, 2020

13 pages, Sep. 2020. "Although investment earnings and employer contributions account for a larger portion of total public pension fund revenues, by providing a consistent and predictable stream of revenue to public pension funds, contributions from employees fill a vital role in financing pension benefits. Reforms made in the wake of the 2008-09 market decline included higher employee contribution rates for many public pension plans. This issue brief examines employee contribution plan designs, policies and recent trends."

Tags: Retirement Plan Design  •  State and Local Government Plans

Rising Pension Costs Likely to Consume 90% of Tax Hike for One California City
Manteca / Ripon Bulletin Link to more items from this source
Sept. 29, 2020

"[T]he city's payments to the California Public Employment Retirement System (CalPERS) will reach $25.2 million in 2025. That is double the $12.4 million Manteca was projected to pay into CalPERS in the fiscal year that ended June 30. ... The significance of that increase is underscored by the fact last year's budget saw an increase of $1,013,160 in property taxes -- the single biggest source of general fund revenue. That mean 90 percent of all new property tax revenue went to covering the city's pension obligations."

Tags: Funding of DB Plans  •  State and Local Government Plans

Employee Benefits in the United States, March 2020
U.S. Bureau of Labor Statistics [BLS] Link to more items from this source
Sept. 24, 2020

"Private industry workers: ... Medical care was available to 27 percent of workers in the lowest 10th percent wage category and 94 percent of workers in the highest 10th percent wage category had access to this benefit. Sixty-seven percent of workers in an establishment with less than 100 employees had access to paid sick leave and 88 percent of workers at establishments with 500 or more employees had access to paid sick leave.... State and local government workers: Seventy-six percent of workers participated in defined benefit plans.... Eighteen percent of workers participated in defined contribution plans and employee contributions were required for 69 percent of these workers.... Medical care and retirement benefits were not available to 1 percent of primary, secondary, and special education school teachers and 99 percent of these workers had access to both benefits."

Tags: Health Plan Design  •  Retirement Plan Design  •  State and Local Government Plans

Editor's Pick Ten Ways to Close Public Pension Funding Gaps (PDF)
National Conference on Public Employee Retirement Systems [NCPERS] Link to more items from this source
Sept. 14, 2020

34 pages. "Solutions can have more staying power and impact if they address underlying, structural fiscal issues and tackle imprudent approaches to allocate state and local government revenues, including pension contributions. This paper describes alternative approaches that public pension systems and their government relations teams should consider, understand, and bring up in discussions, debates, and negotiations."

Tags: Funding of DB Plans  •  State and Local Government Plans

Public Pensions Analysis: High-Level Changes in Unfunded Liabilities as a Percentage of State GDP
STUMP Link to more items from this source
Sept. 10, 2020

"Pension unfunded liabilities are usually quoted without reference to the size of the economy supporting those promises. The ratio of the UAL to the state GDP can give a good relative feel for how indebted each state is for their pensions."

Tags: Funding of DB Plans  •  State and Local Government Plans


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