Moody’s Publishes 2019 State Pension and OPEB Liabilities Report

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Moody’s Publishes 2019 State Pension and OPEB Liabilities Report

On September 17, 2019, Moody’s Investors Service released its publication, Medians – Adjusted net pension liabilities decline; OPEB liabilities vary widely.  In the Sector Profile document, Moody’s states, “Adjusted net pension liabilities (ANPL) declined in states’ fiscal 2018 reporting due to healthy investment returns in fiscal 2017.  States typically report their pension funding positions with a one-year lag.  Favorable investment returns again in 2018 will lead to another modest decline in fiscal 2019 reporting of pension liabilities.  Fiscal 2018 was the first year states reported other post-employment benefit (OPEB) liabilities under new accounting rules, which allow improved comparisons between pension and OPEB liabilities. Adjusted net OPEB liabilities range widely for the 50 states.”

Other highlights include:

  • In Fiscal Year (FY) 2018, the total state ANPL was $1.56 trillion, down 3.6% from FY 2017, which represents 7.7% of U.S. Gross Domestic Product (GDP) and 132.4% of state revenue.  In FY 2020, the total ANPL is projected to increase based on lower investment returns and discount rates in FY 2019.
  • In FY 2018, the average state pension plan investment return was 8.8%, combined with a rise in interest rates, which will reduce liabilities in FY 2019.  However, the average pension plan investment return fell to 6.6% in FY 2019, which is below the target return of 7.2%.

The report is available here.

House Ways & Means Chairman Introduces Bill to Address Windfall Elimination Provision

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House Ways & Means Chairman Introduces Bill to Address Windfall Elimination Provision

On September 27, 2019, the U.S. House Ways and Means Committee Chairman Richard Neal (D-MA) introduced the Public Servants Protection and Fairness Act (H.R. 4540).  The bill provides a new proportional formula for the Windfall Elimination Provision (WEP) based on a worker’s actual earnings.  In addition, the legislation provides a benefit guarantee for current and future retirees to use the greater of the new or old WEP formulas.  The bill also provides immediate relief to current Social Security beneficiaries affected by the WEP in the form of an additional $150 per month.  The relief payments would begin nine months after enactment of the legislation and would continue for as long as the eligible individuals receive Social Security benefits.  The relief payments would be limited to the amount of each individual’s current WEP reduction.

Created in 1983, the WEP was originally intended to equalize the Social Security benefit formula for workers with similar earnings histories, by reducing the Social Security retirement or disability benefits for those who receive benefits from both covered and noncovered employment.

Currently, nearly 2 million Social Security beneficiaries are affected by the WEP.

The press release and further information are available here.

Kaiser Family Foundation Releases 2019 Employer Health Benefits Survey

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Kaiser Family Foundation Releases 2019 Employer Health Benefits Survey

On September 25, 2019, the Kaiser Family Foundation (KFF) released its survey report, 2019 Employer Health Benefits Survey.  The survey provides detailed information regarding health insurance premiums, employer and employee contributions, employee cost-sharing, wellness programs and other topics.

Some of the key findings include:

  • Employer-sponsored health insurance covers about 153 million of the non-elderly population in the U.S.  Approximately 57% of all employers offer health care benefits to at least some workers, and 61% of workers are covered.  All of these percentages are similar to 2018.
  • For employer-sponsored family coverage, annual premiums averaged $20,576 in 2019, up 5% from 2018.  Workers paid an average of $6,015 towards family coverage.
  • For employer-sponsored single coverage, annual premiums averaged $7,188 in 2019, up 4% from 2018.  Workers paid an average of $1,242 towards single coverage.
  • With regard to employee cost-sharing for health care, about 82% of all covered workers faced a general annual deductible, which averaged $1,655 for single coverage in 2019.  Workers in small firms (i.e., with 3 to 199 employees) were more likely to have larger deductibles, which averaged $2,271 as compared with $1,412 in large firms (with 200 or more employees).
  • Almost all large firms and many small firms have health and wellness programs that help workers identify health issues and manage chronic conditions (i.e., health risk assessments, biometric screenings and health promotion programs).

The report concludes, “the national debate about expanding Medicare or creating public programs options provides an opportunity to step back and evaluate how well employer-based coverage is doing in achieving national goals relating to costs and affordability.  In doing so, it will be important to look past averages and examine how well the market serves the many different types of employers and working families in the many different circumstances that they face.”

KFF also updated an interactive graphing tool to examine trends in premiums and worker contributions among workers covered by employer-sponsored coverage at different types of firms.  The tool uses a web-based interface to the underlying Kaiser/HRET data from the Employer Health Benefits Surveys from 1999-2019.

The survey report and interactive graphic are available here. 

Judith Kermans and Brian Murphy to Speak at MAPERS

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September 21-24, 2019

Judith Kermans and Brian Murphy to Speak at MAPERS

Judith Kermans and Brian Murphy will serve as education session presenters during the Michigan Association of Public Employee Retirement Systems (MAPERS) 2019 Fall Conference. Judith’s session, Managing the Unfunded Accrued Liability (UAL), will cover methods to pay off the UAL, discuss the value of pre-funding, and the economic risks of deferring contributions. Brian will present the topic Mortality Rates in the Public Sector. He will discuss the Society of Actuaries’ (SOA) study on differences between private and public sector mortality rates and the implications of the new mortality tables published by the SOA for General, Public Safety, and Teacher plans.

The MAPERS conference will be held September 21-24, 2019 in Kalamazoo, Michigan.

S&P Global Ratings Releases Analysis of State OPEB Risks

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S&P Global Ratings Releases Analysis of State OPEB Risks

On September 17, 2019, S&P Global Ratings released its report, Retiree Medical Benefits Generate Unique Cost Drivers And Risks For U.S. States.  The report examines future risks for other postemployment benefit (OPEB) plans by focusing on: 1) what benefits are being offered; 2) to who are benefits being paid; and 3) how long do OPEB plans provide health care coverage.  S&P Global Ratings believes that the answers to these questions drive the scale of the liability and have extensive implications for the risks incurred by states, which affects their creditworthiness.

Key findings include:

  • OPEBs offered by U.S. state governments have unique features that differentiate them from more clearly defined pension plans;
  • Typically, state OPEB plans provide health care coverage to retirees and dependents for life, but reduces benefits at Medicare eligibility; and
  • The structure of a state OPEB plan’s benefit offerings is essential to credit quality due to budgetary effects.

S&P Global Ratings conducted a survey of 48 of the largest OPEB plans offered within each state as measured by net OPEB liability (NOL).  The data for each state excluded Kansas and South Dakota since they do not report a liability for retiree medical benefits.

The report is available here. 

James Rizzo Participates in Panel on Setting the Pension Investment Assumption

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August 29, 2019

James Rizzo Participates in Panel on Setting the Pension Investment Assumption

On August 29, 2019, James Rizzo, ASA, EA, FCA, MAAA provided expert commentary during a webinar sponsored by the Society of Actuaries (SOA) titled “Pension Investment Return Assumptions: It’s All About Process.” The session focused on the importance of following a robust assumption setting process that considers economic forecasts, time horizons, asset allocation, cash flow, and reasonable ranges and frequency of changes in the investment return assumption.

GRS To Present at MPELRA Fall 2019 Conference

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September 18-20, 2019

GRS To Present at MPELRA Fall 2019 Conference

Jim Anderson and Rich Koch will present the topic “Public Sector Retirement Benefit Issues and Their Impact on Negotiations” during the Fall 2019 Michigan Public Employer Labor Relations Association (MPELRA) training conference. Jim and Rich will discuss how Michigan collective bargaining negotiations continue to evolve as the economic, legal, and regulatory environment associated with public sector benefit plans changes.

GRS will also have an exhibit booth at MPELRA where you can meet our associates, Mark Buis, Jim Anderson, and Rich Koch, to learn more about this topic and GRS’ services.

The MPELRA Conference is being held from September 18-20, 2019 in Bellaire, Michigan.