NASRA Releases Issue Brief on Disability Benefits in Public Retirement Plans

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NASRA Releases Issue Brief on Disability Benefits in Public Retirement Plans

On July 31, 2019, the National Association of State Retirement Administrators (NASRA) released its issue brief, Analysis of Disability Benefits in Public Retirement Plans.  In public retirement systems, disability benefits are intended to provide retirement income security for employees that are unable to work for an extended time period.  The brief includes an: 1) overview of disability benefits; 2) benefit calculation methods; 3) eligibility standards; 4) vesting periods; and 5) duration of disability benefits.

According to the brief, “Although a long-term disability benefit is available to participants of every retirement system examined, a wide range and variety exist in benefit levels, eligibility criteria, and most other basic features that make up this benefit…. The expected duration of the disability varies among plans, with a minimum expected duration of 12 months and a maximum duration of permanent.”

The brief also provides a link to the full data set on a state-by-state basis for in-service and out-of-service disability benefits in public retirement systems.

The brief is available here. 

CRR Issues Brief on the Impact of the Public Pension Board on Investment Returns

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CRR Issues Brief on the Impact of the Public Pension Board on Investment Returns

On August 6, 2019, the Center for Retirement Research at Boston College (CRR) released its brief, Does Public Pension Board Composition Impact Returns?  According to the study, there is a positive and statistically significant relationship between investment performance and the best practices recommended by public plan governance experts.

The key findings include:

  • The oversight of state and local pension funds is critically important to government officials, plan participants and taxpayers;
  • The effectiveness of pension boards depends on their structure, member composition, size, and member tenure;
  • Based on the best practices for each factor, CRR developed a “Board Effectiveness Index” (BEI) for 145 pension funds; and
  • The results indicate that a higher BEI score is associated with a higher 10-year investment return on fund assets.

CRR concludes, “These findings reinforce existing research that suggests that a board designed purposefully and effectively can have positive and long-term benefits for public pension plans.”

The brief is available here.

NIRS Releases Case Studies Report on States that Switched from DB Plans to DC Plans

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NIRS Releases Case Studies Report on States that Switched from DB Plans to DC Plans

August 7, 2019, the National Institute on Retirement Security (NIRS) released its report, Enduring Challenges: Examining the Experiences of States that Closed Pension Plans.  The report provides case studies in four states that closed their defined benefit (DB) plans and switched to defined contribution (DC) or cash balance plans for new employees, including: Alaska, Kentucky, Michigan and West Virginia. 

Key findings include:

  • In the four case studies, the states that switched from a DB plan to a DC or cash balance plan experienced increased costs for taxpayers without significant improvements in funding;
  • Plan design changes have contributed to greater retirement insecurity for employees; and 
  • Due to retirement benefit changes, various workforce challenges have developed, such as recruiting and retaining public employees since the pension plans were closed to new hires. 

The report is available here. 

CRS Publishes Report on Beneficiaries Affected by Both the WEP and GPO

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CRS Publishes Report on Beneficiaries Affected by Both the WEP and GPO

On July 30, 2019, the Congressional Research Service (CRS) published its report, Social Security: Beneficiaries Affected by Both the Windfall Elimination Provision (WEP) and the Governmental Pension Offset (GPO). The WEP and the GPO are two separate provisions that reduce regular Social Security benefits for workers and their eligible family members if the worker receives (or is entitled to) a pension based on earnings from employment not covered by Social Security.

The report examines the current-law provisions of the WEP and the GPO, those affected by both provisions, and size of the affected population. In addition, it examines issues related to Social Security overpayments associated with dually entitled beneficiaries affected by both provisions, the two offsets’ impact on Social Security benefits and household wealth, among others.

The WEP affects retired or disabled workers and their family members and the GPO affects spouses and survivors. The WEP affects Social Security benefits paid to individuals who earn Social Security benefits from Social Security covered employment, but who also earn pension benefits from state or local government employment not covered by Social Security. In these cases, Social Security benefits are lowered by the WEP. Under the GPO, an individual’s Social Security spousal or survivor’s benefit is reduced (“offset”) by two-thirds of the pension benefits received from federal, state, or local government employment that is not covered by Social Security.

According to the report, some beneficiaries that are entitled to both Social Security retirement benefits and spousal benefits may be affected by both the WEP and GPO. Social Security beneficiaries will be affected by both the WEP and GPO if they:

  • Received a noncovered government pension;
  • Are entitled to a WEP-reduced Social Security retired or disabled worker benefit; and
  • Are dually entitled to a Social Security spousal or survivors benefit after the reduction of the retired or disabled worker benefit.
  • About 263,775 Social Security beneficiaries had their benefits reduced by both provisions with 14% of spouses and survivors affected by the WEP and 38% affected by the GPO. The report also indicated that the benefit offsets cause difficulties with calculating and administering Social Security benefits.

The report is available here.

SLGE Publishes 2019 State and Local Government Workforce Survey Report

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SLGE Publishes 2019 State and Local Government Workforce Survey Report

On July 31, 2019, the Center for State & Local Government Excellence (SLGE) released its survey report, State and Local Government Workforce: 2019 Survey. The report includes 2019 data on emerging issues such as the gig economy (including work that is procured on a temporary or contingent basis), flexible work practices, hiring and recruiting challenges, retirement plan or health benefit changes, and separations from service.

The 2019 survey expands its focus on the gig economy with respondents indicating that gig economy hiring has impacted state and local governments with a 3.6% increase in management flexibility and 10.1% decrease in employee morale.

According to SLGE, state and local governments report that they continue to face significant challenges filling various key positions, such as policing, engineering, maintenance work/labor, skilled trades, information technology, and emergency dispatch. Over the past year, the survey finds that 80% of public employers have hired employees and 54% have hired contract or temporary employees. In addition, 88% of respondents consider that their benefits are competitive in the labor market.

Other key findings include:

  • Overall, state and local governments report layoffs have fallen to 7% in 2019, from 42% in 2009. In addition, the growth in longer-term employment predictions is projected to increase to 3.8% for state employees and 7.4% for local employees from 2016 to 2026.
  • To encourage employee retention and development, 67% of respondents provide in-house training, 63% provide funds or reimbursement for training/tuition, 59% support wellness programs, 56% provide sick leave benefits, 53% provide onboarding and 21% offer varying forms of paid family leave.
  • For current employees, 74% of state and local governments have not made any retirement plan changes in the past year. For new employees, 57% have made no changes. Of those that made changes, some of the most common types include: increases in employee contributions (12% among new employees and 10% among current employees), decreases in pension benefits (11% among new employees and 2% among current employees), increases in pension eligibility requirements (9% for new employees and 2% for current employees), and increases in employer contributions (9% for both new and current employees).
  • Only 25% report that their employees are financially prepared for retirement.

The electronic survey was recently conducted among members of the International Public Management Association for Human Resources (IPMA-HR) and the National Association of State Personnel Executives (NASPE). Of the 335 respondents who participated in the survey, 78% represented local governments, 15% represented state governments, and 7% represented the federal government or non-governmental sectors.

The report is available here.

SLGE/NASRA Publish Infographic for Other Post-Employment Benefits (OPEBs) by State for FY 2017

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SLGE/NASRA Publish Infographic for Other Post-Employment Benefits (OPEBs) by State for FY 2017

On July 31, 2019, the Center for State & Local Government Excellence (SLGE) and the National Association of State Retirement Administrators (NASRA) published its infographic, Other Post-Employment Benefits (OPEBs) by State: FY 2017 Snapshot.  The infographic contains a series of graphs that illustrate key data and trends of OPEBs on a state-by-state basis, including: unfunded liabilities, assets, costs, and current contribution levels.

The summary indicates that there are significant variations among states related to the types of retiree health benefits offered, level of unfunded liability, and other factors regarding annual costs and budget effects.  In FY 2017, about $673 billion (93%) of state OPEB liabilities were not funded by assets.  In addition, 28 states have about $52 billion in assets that vary to prefund OPEB benefits, of which 34% are being held by the State of Ohio and its political subdivisions.  States’ actual OPEB spending was about 1.5% of state fund expenditures in FY 2017.  In aggregate, states contributed about 44% of the actuarially determined contribution (ADC) and, if the full ADC was paid, state spending on retiree health benefits would increase to 3.5% of state fund expenditures.

The infographic is available here. 

EBRI Finds More Workers Eligible for Health Coverage Despite Fewer Employers Offering Health Insurance

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EBRI Finds More Workers Eligible for Health Coverage Despite Fewer Employers Offering Health Insurance

On August 22, 2019, the Employee Benefit Research Institute (EBRI) released its infographic, Why Are More Workers Eligible for Health Coverage When Fewer Employers Offer It?  According to EBRI, the percentage of workers eligible for health benefits increased despite the lack of growth in employers offering health insurance. 

Between 2014 and 2018, the workers eligible for health benefits increased from 75.4% to 78.0% while the percentage of employers offering health benefits declined slightly from 47.5% to 46.8%.  The report suggests that more workers are migrating to jobs that offer health insurance.  The recent trends indicate a shift to      full-time employment, fewer individuals being considered low-wage workers, more workers employed by larger firms, and more workers employed by firms with union employees.

The infographic is available here.

DOL Releases USERRA Fact Sheet

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DOL Releases USERRA Fact Sheet

On August 8, 2019, the U.S. Department of Labor’s Veterans’ Employment and Training Service (VETS) has released a fact sheet for employers to help understand their responsibilities for reemployed military service members under the pension provisions of the Uniformed Services Employment and Reemployment Rights Act (USERRA) and related regulations.  After reemployment, USERRA requires that returning military service members be treated as though they did not have a break in civilian employment for the purpose of participation, vesting, and accrual of pension benefits from their employers during their military-related absence.

The VETS USERRA Fact Sheet #1 is available here.  

Groundbreaking Pension Study Proves that DB Design Is the Most Efficient Use of Taxpayer Dollars

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Groundbreaking Pension Study Proves that DB Design Is the Most Efficient Use of Taxpayer Dollars

Pension reform continues to capture the headlines in various forms such as proposed changes to plan structure, the effect of public pension debt on governments and taxpayers, the question of who should bear the risk inherent in the capital markets, and the issue of retirement security for current and future generations. Within all of the debate, the fundamental question is whether the best vehicle to provide pension benefits is through a defined benefit (DB) or a defined contribution (DC) approach. Some pension reform advocates call for the public sector to adopt changes that mirror what has been done in the private sector, which has been primarily a move to defined contribution plans.

Like many statewide systems, Colorado’s pension reform resulted in elements of both DB and DC features, but unlike many state systems, Colorado does not participate in Social Security. Despite pension reform, scrutiny regarding the plan’s fiscal efficiency remained and some stakeholders continued to ask about alternatives.

The State determined that only a comprehensive study could respond to the questions being asked. The Colorado State Auditor’s Office commissioned Gabriel, Roeder, Smith & Company to conduct this comprehensive analysis.  Ms. Leslie Thompson, FSA, EA, MAAA served as the lead consulting actuary on the study and the main author for the report.

The key elements of the study include an analysis of retirement income, a review against peer groups, and a review of what new hires would receive under a mix of both public sector and private sector plan structures. By comparing the most recent tiers of benefits under all alternative plans, the study looked at the cost for keeping the new hire benefits the same and, conversely, the benefits for keeping the cost the same. This comprehensive report fully tackles the DB versus DC comparison using generally accepted quantification techniques to move the discussion to a more data driven and independent basis. It also provides a great deal of information on the delivery of benefit adequacy to public sector employees and retirees.

In July 2015, the Auditor’s Office released the report examining Colorado PERA’s retirement plan design comparing it to alternative public and private sector retirement savings options and Social Security. The study found the current Colorado PERA hybrid design is more efficient and uses taxpayer dollars more effectively than the other types of plans in use today.

The impact of this study is clear based on comments by highly regarded industry professionals and associations.

  • In a recent communication to NCTR members , Meredith Williams, current NCTR Executive Director and former CO PERA Executive Director stated:  “Indeed, alternative plans would provide a lower retirement benefit/replacement ratio for the same cost as the current COPERA model, according to the report, and would require greater contributions in order to replace the same retirement income. As I have said before, I think this is such an important new tool in all of our member systems’ toolkits, For any plan that is facing a “reform” challenge that would replace the DB model, this report is “just invaluable” in showing how all of the other alternatives are not as efficient or cost effective,” Williams stressed.
  • CO PERA Executive Director Gregory W. Smith has stated: “This independent analysis of the Colorado PERA retirement plan design provides policymakers with sound information and comprehensive comparisons of the costs and benefits provided by alternative plans.”

Read the report.

Joseph Newton to Speak at 2019 NASRA Conference

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August 3-7, 2019

Joseph Newton to Speak at 2019 NASRA Conference

Joseph Newton, FSA, EA, FCA, MAAA, will serve as a speaker for the Actuaries and Risk Assessment Panel at the 2019 National Association of State Retirement Administrators (NASRA) Conference.

The NASRA Conference is being held from August 3-7, 2019 in Williamsburg, Virgina.