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Designing and Implementing Sustainable Pension Benefit 'Tiers' for Government Employees

[Many state and local governments] are changing the structure of their employee pension benefits.... to limit existing pension benefits to current employees and create lower-cost pension benefit tiers for new employees.... In some cases, these changes can also be applied to existing employees.... The Government Finance Officers Association (GFOA) recommends that jurisdictions considering new benefit tiers examine the following issues: ...

Sustainable Funding Practices of Defined Benefit Pension Plans, 2009 (PDF)

3 pages. Excerpt: Recommendation. The Government Finance Officers Association (GFOA) recommends that state and local government officials ensure that the costs of the benefits promised in public employee DB plans are properly measured and reported, in accordance with generally accepted accounting principles (GAAP)1. The GFOA believes sustainability requires that governments that sponsor or participate in a defined benefit pension plan contribute the full amount of their actuarially determined annual required contribution (ARC) each year. Failing to fund the ARC during recessionary periods impairs investment returns by depriving the fund of its opportunity to invest when stock prices are low. Long-term investment performance will suffer and ultimately require higher contributions.

Responsible Management and Design Practices for Defined Benefit Pension Plans (PDF)

2 pages. "Recommendation. The Government Finance Officers Association ... recommends that under no circumstance should state and local government plan sponsors engage in pension contribution holidays or make insufficient contributions."

Public Employee Retirement System Investments, 1993, 1995, 1997 and 2009 (PDF)

Excerpt: Recommendation. The Government Finance Officers Association (GFOA) recommends that fiduciaries adhere to the following best practices regarding investments: 1. Pension fund fiduciaries should establish a written investment policy that lays out formal policies and procedures to regulate and monitor the system's investment program. The investment policy should: establish the objectives of the investment program; define acceptable risk; establish liquidity requirements at a level that does not compromise the system's cash flow needs; describe diversification requirements; comply with applicable state and local statutes.

Asset Allocation Guidance for Defined Contribution Plans, 1999 and 2009 (PDF)

2 pages. Excerpt: Recommendation. The Government Finance Officers Association (GFOA) recommends that public employers as plan sponsors work actively with the plan administrators to provide investment options and education to help employees who participate in defined contribution plans attain their income replacement goals in retirement.... To accomplishthese objectives, the following practices are suggested: 1. To provide adequate diversification, plan administrators should ensure participants are offered a broad spectrum of investment choices that include all the major asset classes (e.g., equities, fixed income, and cash equivalents). The investment choices should include several passively managed investment options such as low-fee index funds. Another option is a family of asset allocation funds. In addition to mutual funds, plan administrators should consider lower-cost commingled funds and separate account funds asinvestment options.

Public Sector Strategic Health Care Plan Design (PDF)

3 pages. Excerpt: The Government Finance Officers Association (GFOA) recommends that [public sector] plan sponsors consider developing and formally adopting a long-term, strategic plan that includes guiding principles and key objectives for managing health-care costs and improving participant wellness. The strategic plan design should consider both incremental changes and major initiatives to establish an efficient and effective structure that will enable the plan sponsor to provide the desired level of health-care coverage while maintaining those costs atsustainable levels.

Participant Education: Guidance for Defined Contribution Plans, 2009 (PDF)

2 pages. Excerpt: The GFOA recommends that public plan sponsors make sure high-quality investment education is provided to defined contribution plan participants who are allowed to direct their investments. To accomplish this goal: 1. The plan should provide a consistent, ongoing educational program that uses a number of communication channels to address participants' different career stages and learning styles. Channelscould include one-on-one meetings, seminars, phone calls, the internet[.]

Communicating Health-Care Benefits to Employees and Retirees: Recommended Practice (PDF)

1 page. Approved by the GFOA's Executive Board, February 27, 2009.