U.S. Census Bureau Reports Public Pension Assets Increased Slightly in the Second Quarter of 2019

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U.S. Census Bureau Reports Public Pension Assets Increased Slightly in the Second Quarter of 2019

On September 30, 2019, the U.S. Census Bureau reported that total holdings and investments for the 100 largest state and local government retirement systems increased 3.0% to $3.96 trillion at the end of the second quarter of 2019.

​During the second quarter of 2019, corporate equity (both foreign and domestic) increased 5.0% from $1.70 trillion to $1.79 trillion, corporate bonds (both foreign and domestic) decreased 12.6% to $405.1 billion, private equity increased 8.9% from $416.3 billion to $453.3 billion, federal government securities increased 2.4% to $487.5 billion, indirectly held assets increased 0.7% from $428.1 billion to $431.2 billion, cash and short-term investments decreased 9.4% to $88.4 billion, and other investments (such as real estate) increased 16.0% from $265.6 billion to $308.0 billion.

The results are from the U.S. Census Bureau’s Quarterly Survey of Public Pensions which surveys the revenues, expenditures, and composition of assets for the 100 largest U.S. public employee retirement systems.  These systems comprise 88% of the total cash and security holdings reported for public plans in the 2012 Census of Governments.  The report also provides a table showing the quarterly distribution of cash and security holdings for the second quarter of 2019.

The summary is available here.

Meet Our Church Plan Experts at DFMC

Events​

September 29-October 2, 2019

Meet Our Church Plan Experts at DFMC

Come visit GRS’ exhibit booth #210 during the 2019 Diocesan Fiscal Management Conference. Robert Nordin and Bonnie Wurst will be hosting the booth and available to discuss GRS’ church pension plan expertise. DFMC is being held at the Hyatt Regency Chicago, IL from September 29-October 2, 2019.

CRR Issues Brief on the Effect of Medicare Part D on Drugs and Pricing

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CRR Issues Brief on the Effect of Medicare Part D on Drugs and Pricing

On September 17, 2019, the Center for Retirement Research at Boston College (CRR) released its issue brief, Medicare Part D’s Effect on Evergreening, Generics, & Drug Prices.  In 2006, the Medicare Part D Prescription Drug Benefit was enacted which expanded drug coverage for Medicare beneficiaries through private plans approved by the federal government.  This brief examines the effect of Medicare Part D on prescription and generic drugs, and pricing.

The key findings include:

  • Medicare Part D may affect the behavior of brand-name and generic drug producers by increasing the demand and shifting the market control from manufacturers to insurers;
  • Brand-name drug companies may be more likely to maintain monopoly power by making slight changes to their drugs, known as “evergreening”;
  • Generic companies may be less likely to introduce alternative drugs due to less bargaining power than insurers;
  • Overall, Medicare Part D has increased evergreening and reduced the entry of generic drugs which has caused drug prices to rise; and
  • Generally, Medicare Part D has expanded drug coverage for individuals age 65 and over which helped to keep drug prices lower than they otherwise would have been without it.

The brief is available here.

SLGE Publishes Infographic on Public Education Workforce Trends and Demographics

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SLGE Publishes Infographic on Public Education Workforce Trends and Demographics

On September 16, 2019, the Center for State & Local Government Excellence (SLGE) published its infographic, K-12 Public Workforce Profile.  The infographic provides an overview of the kindergarten through 12th grade public education workforce data, which comprise over 45% of the total state and local government employees.

The key highlights include:

  • For K-12 public school teachers, the median age is 41.4 years and the average years of service is 13.7 years;
  • 73% of local government education employees are female; and
  • By 2026, employment projections estimate an increasing need for education professionals.

According to Gerald Young, SLGE Senior Research Associate and author of the infographic, “The research makes clear there is a growing need for education professionals, yet state and local governments already are having a tough time attracting and retaining teachers. This baseline data will help to better understand the efficacy of targeted recruiting methods and enable a deeper look at the role retirement benefits play as a workforce management tool for K-12 education.”

The infographic is available here.  

NASRA Updates Issue Brief on Employee Contributions to Public Pension Plans

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NASRA Updates Issue Brief on Employee Contributions to Public Pension Plans

On September 11, 2019, the National Association of State Retirement Administrators (NASRA) updated its issue brief, Employee Contributions to Public Pension Plans.  The brief analyzes employee contribution plan designs, policies and recent trends. 

According to the brief, almost all state and local government employees are required to contribute to the cost of their retirement benefits.  The report also indicates that 25%-30% of state and local government employees do not participate in Social Security.  In many cases, those who do not participate in Social Security have a higher pension benefit and higher required contributions as compared with those who do participate in Social Security.  The median contribution rates have increased to 6% of pay for employees who participate in Social Security and remain steady at 8.0% for those employees who do not participate in Social Security. 

As reported in the brief, since 2009, more than 35 state governments increased their employee contribution rates.  The legality of increasing employee contributions varies by state.  In some states, courts have ruled that legislative efforts to increase employee contributions are a violation of the state constitution or contractual rights.  However, in other states, higher employee contributions have either withstood or have not been subject to legal challenges. 

The brief also includes an appendix of employee contribution rates for about 120 public pension plans and identifies whether or not plan members have Social Security coverage.

The issue brief is available here.

CRR Releases Brief on Public Plans’ Investments and Asset Value Measurements

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CRR Releases Brief on Public Plans’ Investments and Asset Value Measurements

On September 3, 2019, the Center for Retirement Research at Boston College (CRR) released its issue brief, Investment Update: How Do Public Plans Value Their Assets?  The brief: 1) provides an update on the investment performance of U.S. public pension plans since 2001; and 2) discusses new Governmental Accounting Standards Board (GASB) reporting under Statement No. 72 regarding fair value measurement and application.

The key findings include:

  • GASB Statement No. 72 requires state and local pension plans to categorize assets based on the method used to determine the fair market value.
  • The categories include: Level 1 for frequently traded assets (i.e., equities); Level 2 for less liquid assets (i.e., corporate bonds); and Level 3 for appraisals (i.e., real estate).
  • For assets without a “readily determinable” fair market value, a pension plan may use the net asset value (NAV) per share to determine the fair value.
  • Potentially these “NAV assets” may be assigned to Levels 1, 2, or 3 when equated with comparable assets in each level.
  • Due to redistributing NAV assets, about 25% of total assets may be valued based on appraisals under Level 3, which are more subjective.

The brief concludes, “The new standards are an important step towards greater investment transparency, but they could be improved with clearer disclosure of NAV assets.  Such information would allow the public to better understand what portion of plans’ reported assets are based on estimates that, by necessity, are more subjective.”

The brief is available here.

Commonwealth Fund Finds More Americans Are Underinsured in Employer Health Plans-August 2019 Survey Brief

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Commonwealth Fund Finds More Americans Are Underinsured in Employer Health Plans-August 2019 Survey Brief

On August 28, 2019, the Commonwealth Fund released its survey brief, Who Are the Remaining Uninsured, and Why Do They Lack Coverage?  The report is based on findings from the Commonwealth Fund Biennial Health Insurance Survey, 2018.  According to the survey, the Affordable Care Act (ACA) has expanded and helped to improve coverage options for individuals without access to job-based health plans.  However, an estimated   30.4 million individuals were uninsured in 2018, up from a low of 28.6 million in 2016.  The survey found that affordability remains the primary reason for those individuals that remain uninsured.

Key findings include:

  • In 2018, uninsured U.S. working-age adults were disproportionately under age 35, low income and Latino.
  • Nearly 50% of uninsured adults may be eligible for Marketplace subsidies or Medicaid.
  • 67% of uninsured adults did not visit the Marketplace to examine their coverage options.  Of those, 36% cited affordability concerns for health insurance.
  •  Following the ACA individual market subsidies and reforms, those who had tried to buy a plan in the individual market and reported difficulties finding an affordable plan fell from 60% to 34%.  In 2018, 42% of adults reported difficulty finding affordable coverage.
  • 62% of adults with individual coverage and 84% with Medicaid rated their coverage as “good,” “very good,” or “excellent.”

The brief indicates that federal and state policymakers have various options that could help individuals retain or gain health care coverage within the existing law.

The brief is available here.

BLS Reports on Employee Benefits for Private Industry and Public Sector Workers in 2019

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BLS Reports on Employee Benefits for Private Industry and Public Sector Workers in 2019

On September 19, 2019, the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) released its report on employee benefits for private industry and state and local government workers as of March 2019.  The data is compiled from the National Compensation Survey (NCS) which conducts periodic updates on the provisions and incidence of employee benefit plans, and comprehensive measures of compensation cost trends.

The key findings include:

  • For retirement benefits, 99% of full-time state and local government workers had access to retirement benefits with 90% participating.  By comparison, 77% of full-time private industry workers had access with 61% participating.  Note that retirement benefits include those provided through defined benefit and defined contribution plans.
  • For employer-provided medical care, 99% of full-time state and local government workers had access to employer-provided medical care, with 78% participating.  By comparison, 84% of full-time private industry workers had access with 61% participating.
  • For life insurance benefits, 91% of full-time state and local government workers had access compared to 70% of full-time private industry workers.  Most workers who had access to life insurance benefits chose to participate.

The news release is available here.

SSA Releases 2019 Social Security Fast Facts and Figures

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SSA Releases 2019 Social Security Fast Facts and Figures

In August 2019, the Social Security Administration’s (SSA) Office of Policy released Fast Facts & Figures about Social Security, 2019. The publication answers frequently asked questions (FAQs) about the programs administered by the SSA and focuses on data related to Social Security retirement, survivors, and disability benefits, as well as Supplemental Security Income (SSI).  Most of the data are derived from the SSA’s Annual Statistical Supplement to the Social Security Bulletin and the 2019 Social Security Trustees Report.

Some of the report’s highlights include: 

  • Overall, about 67.9 million people received SSA benefits or assistance in 2018, with benefits averaging $1,461 per month for retired workers, $1,234 per month for disabled workers, and $1,388 per month for non-disabled widows and widowers;
  • In 2018, about 5.6 million people were newly awarded Social Security benefits, of which 55% were retired workers, 12% were disabled workers and 33% were survivors and dependents; and
  • About 55% of the adult SSA beneficiaries were women.

The publication also provides a table showing the gradual extended ages for full Social Security retirement benefits based on year of birth.  For those born before 1938, eligibility for full retirement benefits is age 65.  Beginning with those born in 1938, the age for full benefits increases by two months each year until reaching age 66 for those born in 1943.  It remains at age 66 for those born from 1943 through 1954, and then continues increasing by two months each year until reaching age 67 for those born in 1960 and later. 

The report is available here.

SLGE/AARP Publishes Guide for Elected Officials on Proactive Pension Management

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SLGE/AARP Publishes Guide for Elected Officials on Proactive Pension Management

On September 18, 2019, the Center for State & Local Government Excellence (SLGE) and AARP published a new report, Proactive Pension Management: An Elected Official’s Guide to Variable Benefit and Contribution Arrangements.  This guide is intended to provide policymakers and stakeholders with an overview of variable benefit and contribution arrangements for public pension plans, which may possibly be considered to incorporate variable components in benefit or contribution management.

According to the report, “Under [variable benefit and/or variable contribution] arrangements, a pre-set formula drives occasional adjustments in the plan to maintain long-term stability.”  The report discusses how variable arrangements may help to improve flexibility, risk and gain sharing, and potential benefits to the plans and beneficiaries while preserving their defined benefit pension system.

In addition, the report includes six case studies of variable arrangements that have been implemented in Colorado, Iowa, South Dakota, Utah, Virginia and Wisconsin. The case studies presented show that variable arrangements “enable all stakeholders to understand how, when, and to what extent contributions or benefits might be subject to formula-based changes, and as a result, enable them to plan for the long-term.”

The report concludes, “the example of these states shows that there is no one single path forward.  Variable contributions, variable benefits, adjustable COLAs, shared risk, and auto-escalation are all changes worth exploring and may be part of a healthy, proactive strategy for short-term predictability of costs and benefits, long-term financial sustainability, and appropriate balancing of risk among employers, employees, and retirees.”  It adds, “effective pension oversight also requires accurate forecasting of financial and workforce trends.” 

The guide is available here.