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Reason Foundation's Pension Reform Newsletter, December 2014

Topics include: [1] GAO Report on Pension Discount Rates: A Comprehensive Picture; [2] Myth And Muddle Blocking Pension Reform; [3] Stockton and Detroit Exit Bankruptcy Leaving Pension Systems As-Is; [4] Judge Strikes Down Reform of Illinois' Extremely Screwed Up Public Pensions; [5] Pension Debt: Omaha's Billion Dollar Problem; [6] Demographic Changes Threaten Pensions; and [7] Truth in Accounting: The 2013 Financial State of States.

NASRA Response to the Reason Foundation Study, 'The Gathering Pension Storm' (PDF)

26 pages. Excerpt: NASRA believes the Reason study makes its case by 1) distorting the true financial condition of public pensions in general; 2) mistakenly extrapolating a handful of public pension problems onto the entire public pension community; 3) failing to consider the many negative consequences that would result from terminating DB plans; and 4) advancing arguments that reflect an incomplete understanding of public pension issues.

The #1 Reason Multiemployer Plans Fail a DOL Audit

"Multiemployer plan trustees have a fiduciary duty under ERISA to make sure the fund is receiving all employer contributions that are due, based on participants' hours worked. This means they must follow up when employers neglect to send their contributions on time (in other words, when they're delinquent). This also means trustees need to make sure that the correct amounts are received. If trustees neglect this fiduciary responsibility, they can be personally liable. They help fulfill this duty by having a payroll audit performed by a knowledgeable and experienced auditor."

There's a Very Good Reason Wal-Mart Supports an Employer Mandate

Excerpt: Recent press reports, including a front-page story in the Wall Street Journal, have the news that Wal-Mart has signed a letter to President Obama endorsing the idea of an 'employer mandate' ? a requirement that employers offer health insurance to their employees. Why would Wal-Mart ? the nation's largest employer ? endorse such an idea? Simple: It would cripple many of their competitors.

The Economy and Health Care Jobs: A Reason to Fast Track Coverage

Excerpt: Health care is one of the few relatively healthy parts of our unhealthy economy right now. Since January 2008, the economy has lost 4.3 million non-farm jobs.... But where did employment go up the most since January of last year? You guessed it: Health care, which added 383,200 jobs.... These numbers underscore a similar point made recently by my friend Uwe Reinhardt. Cutting back on health care spending is tricky right now because health care is one of the few things fueling our economy, which desperately needs a boost.

Public Pensions Should Capitalize on Strong 2024 Returns to Build Long-Term Stability

"Most public pensions benefited significantly from strong equity returns in 2024. According to Reason Foundation's data, the average total asset return reached 9.9%, compared to the average assumed rate of return of 7%. This positive financial momentum for most public pension plans provides a critical opportunity for policymakers to address unfunded liabilities, safeguard retirement benefits, and reduce the potential burden on taxpayers."

How to Fix California's Public Pension Crisis

Excerpt: [This] new Reason Foundation report details how the state got into this pension crisis and how to fix it. This study highlights numerous problems, including[.]

Arizona Voters Approve Public Employee Pension Reforms

"New hires will be able to choose between defined contribution plan (like a 401(k)-style savings plan) or a hybrid defined benefit plan rather than the traditional pension system. New hires will have the salary cap for pension calculations reduced from $265,000 to 110,000 per year, seriously limiting incentives for finding ways to 'spike' pensions with bonuses or unused vacation time to jack up what retiring employees will be receiving. The eligibility age for new hires will be increased from 52.5 to 55.... The Reason Foundation calculates savings of $1.5 billion over 30 years and a reduction of retirement costs for new employees by 20 to 43 percent."

California Faces $379 Billion Retirement Liability, According to Study

Excerpt: A new study released by the Foundation for Educational Choice and the Pacific Research Institute estimates California's unfunded liability for state (CalPERS and CalSTRS) pensions and retiree health care at $379 billion.

Most State and Local Government Pension Contributions Go Toward Paying Off Debt, Not Funding Benefits

"State and local governments have been making higher pension contributions to their employees' pension funds, but not because public pension benefits have become more generous. Instead, growing debt from past underfunding of pension benefits has largely driven the increase in contribution rates. Today, the majority of contributions made to public pension systems go toward amortizing unfunded liabilities rather than funding the benefits promised to current employees."