NCPERS Studies Public Pension and Education Funding

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NCPERS Studies Public Pension and Education Funding

In October 2019, the National Conference on Public Employee Retirement Systems (NCPERS) released its report, Peaceful Coexistence: The Facts About Pensions and Education Funding.  According to NCPERS, state and local contributions to pension plans can co-exist with education funding when reliable revenue streams exist.  In 2016, the study found that state and local government pension contributions were 4.1% of state revenue as compared with 28.3% for education.

The report examines several recent studies of the impact of pension plans on education spending and includes a state-by-state analysis that compares state expenditures on education and funding with economic and revenue trends.

According to Michael Kahn, NCPERS Director of Research, “revenue systems should be designed to help state and local governments steadily weather the ups and downs in the economy and serve as a source of stable funding for a variety of obligations, including education and pensions.”

The report is available here.

Society of Actuaries Releases Mortality Improvement Scale MP-2019

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Society of Actuaries Releases Mortality Improvement Scale MP-2019

On October 25, 2019, the Retirement Plans Experience Committee (RPEC) of the Society of Actuaries (SOA) issued its Mortality Improvement Scale MP-2019 Report.  The report provides the new MP-2019 Mortality Improvement Scale, which is an annually updated mortality improvement scale for pension plans.  The new scale suggests that life expectancies decreased slightly, which may result in slightly lower pension plan obligations.  According to the SOA’s report, their preliminary estimates indicate that, generally, updating from MP-2018 to the MP-2019 scale may reduce a pension plan’s obligations by about 0.3% to 1.0%, when calculated using a 4.0% discount rate.

The MP-2019 scale incorporates the most recent publicly available mortality data from the Social Security Administration (SSA) for 2015 and 2016.  In addition, it includes preliminary 2017 data developed by the SOA and acquired from the SSA, Centers for Disease Control and Prevention (CDC), Centers for Medicare and Medicaid Services (CMS) and the U.S. Census Bureau. 

As reported by the National Center for Health Statistics, the age-adjusted U.S. mortality rate was 0.4% higher for 2017 than in 2016.  In addition, the period 2010-2017 had the lowest average rate of U.S. mortality improvement than any eight-year period since 1962-1969.

Currently, Piotr Krekora, Consultant for GRS, serves as a member of the RPEC and David Kausch, Chief Actuary for GRS, previously served as a member and chairperson of the RPEC.

MP-2019 is available here.

CRS Updates Report on Social Security’s Windfall Elimination Provision (WEP)

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CRS Updates Report on Social Security’s Windfall Elimination Provision (WEP)

On October 22, 2019, the Congressional Research Service (CRS) published its updated report, Social Security: The Windfall Elimination Provision (WEP).  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.

Social Security benefits are designed to replace a larger percent of pre-retirement income for lower-paid workers than for higher-paid workers.  This is done by: 1) calculating an employee’s average indexed monthly earnings (AIME) from employment covered by Social Security; and 2) calculating the employee’s primary insurance amount (PIA) using a formula that applies a higher replacement percentage to lower earnings than to higher earnings. 

In 2019, the PIA formula is:

  • 90% for the first $926 of AIME, plus
  • 32% of AIME over $926 and through $5,583 (if any), plus
  • 15% of AIME over $5,583 (if any).

Before the WEP was established, for those who split their careers between covered and non-covered Social Security employment, the PIA formula resulted in a higher proportion of covered earnings being subject to the 90% rate.  This resulted in what some perceived as a “windfall.”  In 1983, Congress passed the WEP to eliminate this perceived advantage by lowering the 90% rate to 40% for those subject to the WEP. 

As of December 2018, Social Security Administration data indicates that about 1.9 million individuals (of 3% of all Social Security beneficiaries) were affected by the WEP, most of whom (94%) were retired workers.

The report is available here.

GRS Employees Support Denim Day Fundraiser

Events​

October 12, 2019

GRS Employees Support Denim Day Fundraiser

During the week of October 7th through October 11th, GRS employees joined individuals across the country for the American Cancer Society’s Denim Day fundraiser to help in the fight against breast cancer.  Denim Day is an annual fundraising effort at GRS, with 2019 marking our 12th year of support.

National Denim Day has raised millions for breast cancer research and patient education and support since 1996. 

Paul Wood to Serve on Actuarial Audit Panel

Events​

October 12-15, 2019

Paul Wood to Serve on Actuarial Audit Panel

Paul Wood, ASA, FCA, MAAA will serve as a panel speaker at the National Council on Teacher Retirement (NCTR) Annual Conference for the session on Actuarial Audits. The NCTR Conference is being held October 12-15, 2019 in Nashville, Tennessee.

Joseph Newton Appointed to the NASRA Associate Advisory Committee

Events​

October 2, 2019

Joseph Newton Appointed to the NASRA Associate Advisory Committee

GRS congratulates Joseph Newton, FSA, EA, FCA, MAAA, Pension Market Leader on his appointment to the NASRA Associate Advisory Committee. Joe will serve a three-year term expiring in 2022. This well-deserved appointment reflects Joe’s career-long commitment to the success of public employee retirement systems throughout the U.S.

The National Association of State Retirement Administrators (NASRA) is a non-profit association whose members are the directors of the nation’s state, territorial, and largest statewide public retirement systems.

James Rizzo to Present at the FPPTA 2019 Fall Trustees School

Events​

October 6-9, 2019

James Rizzo to Present at the FPPTA 2019 Fall Trustees School

James Rizzo will present the topic “Actuarial Return Assumptions: What I Learned from the National Hurricane Center” at the Florida Public Pension Trustees Association (FPPTA) 2019 Fall Trustees School. The presentation is a look at how statistical, dynamic, and consensus models can help public employee retirement system trustees set the investment return assumption.

The FPPTA 2019 Fall Trustees School is being held on October 6-9, 2019 in Ponte Verde, Florida.