GFOA Releases Guide on Working Remotely for State and Local Governments

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GFOA Releases Guide on Working Remotely for State and Local Governments

Recently, the Government Finance Officers Association (GFOA) released its report, Working Remotely: A Guide for the Public Sector.  The guide is intended to provide best practices for state and local governments related to employees working remotely during and after COVID-19.  Due to the pandemic, many state and local governments are working to navigate a remote work environment for employees. 

The rapid changes to remote work have presented various challenges to public sector operations and technology requirements.  The guide provides checklists for governments to consider to help manage operations and technology as well as to support remote employees, including: 1) operating policies and procedures; 2) technology policies and procedures; 3) issuing devices for employees; and 4) maintaining processes after employees and equipment are deployed for remote work.

The guide is available here.

CRR/SLGE Find Funded Ratios of Local Government Pension Plans Remain Steady in Fiscal Year 2020

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CRR/SLGE Find Funded Ratios of Local Government Pension Plans Remain Steady in Fiscal Year 2020

On August 18, 2020, the Center for Retirement Research at Boston College (CRR) and the Center for State and Local Government Excellence (SLGE) released their research brief, The Status of Local Government Pension Plans in the Midst of COVID-19.  According to the brief, the average funded ratio of local government pension plans will likely remain unchanged during fiscal year 2020 despite the ongoing COVID-19 pandemic and economic downturn.

In addition, their projections indicate that local pensions are relatively sustainable on a cash-flow basis. Furthermore, most local plans will maintain sufficient assets to pay benefits indefinitely at their current contribution levels.  However, the exceptions would be the very worst-funded local pension plans, which may face the real risk of exhausting their assets.  

Due to the COVID-19 recession, stresses on government finances may affect the ability for localities to cover their required pension contributions.  Beyond 2020, the projections suggest that the finances for all public plans may further deteriorate, and local plans could be slightly worse off than state plans.  The research projects that local plans will have an aggregate funded ratio between 61.7% and 64.6% by fiscal year 2025, while state plans are projected to have an aggregate funded ratio between 65.2% and 68.2%.

The brief is available here.

CRS Updates Report on Health Savings Accounts

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CRS Updates Report on Health Savings Accounts

On August 13, 2020, the Congressional Research Service (CRS) released its updated report, Health Savings Accounts (HSAs).  HSAs are tax-favored individual accounts that can be used to accumulate funds to cover unreimbursed medical expenses (e.g., deductibles, copayments, coinsurance and other services not covered by insurance).  The updated report incorporates changes made to HSAs as a result of the COVID-19 pandemic and recent recession. 

The report summarizes the principal rules governing HSAs, including: 1) eligibility; 2) qualifying health insurance; 3) contributions; 4) withdrawals; and 5) tax advantages.  In addition, the report provides information regarding HSA data limitations and current research data findings on High Deductible Health Plans (HDHP) enrollment and HSA utilization trends. 

In 2020, the maximum annual contribution limit is $3,550 for individuals with self-only coverage and $7,100 for those with family coverage.  In 2021, the maximum annual contribution limit is $3,600 for self-only coverage and $7,200 for family coverage.  The applicable annual limits apply to total contributions to the HSA from all sources (i.e., from individuals and employers).  These amounts are adjusted for inflation annually (rounded to the nearest $50).

The main tax advantages of HSAs include:

  • Individual contributions are tax deductible unless made through a pretax salary reduction agreement;
  • Employer contributions (including individual contributions made through pretax salary reductions) are excluded from taxable income and from Social Security, Medicare, and unemployment insurance taxes;
  • Account earnings are tax exempt; and
  • Withdrawals are not taxed if used for qualified medical expenses.

The qualified individuals who contribute to their HSAs may claim a deduction on their federal income tax return to reduce their tax burden.  Generally, individuals are penalized for withdrawing funds for nonqualified medical expenses and for making contributions above the annual HSA limit.

The report is available here.  

National League of Cities Publishes 2020 City Fiscal Conditions Report

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National League of Cities Publishes 2020 City Fiscal Conditions Report

On August 13, 2020, the National League of Cities (NLC) released the results of its annual survey, City Fiscal Conditions 2020.  The report provides perspective about the importance of local fiscal health for national economic recovery.  The survey of city finance officers indicates that U.S. cities are experiencing the fiscal consequences of the pandemic-downturn at an unprecedented rate.  It is expected to take years for municipal budgets to recover from the impact of COVID-19. 

The report’s key findings include:

  • In Fiscal Year (FY) 2021, nearly 90% of cities will be less able to meet the fiscal needs of their communities than in FY 2020, which has not been reported since the Great Recession in 2008;
  • For FY 2020, year-over-year general fund revenue growth is currently estimated at near zero;
  • On average, cities estimate that general fund revenues will decrease 13% from FY 2020 to FY 2021; and
  • In FY 2020, all major local tax revenue sources slowed with severe year-over-year declines in receipts in sales (-11%) and income tax (-3.4%).

The 2020 survey data was based on a sampling of more than 1,000 cities with populations over 10,000.  In total, the 2020 data was based on responses from 485 cities (48.3%) assessing their fiscal status, actions taken, and the factors affecting fiscal conditions. 

The report is available here.

CRS Reports on Social Security’s Economic Growth and Funding Shortfall

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CRS Reports on Social Security’s Economic Growth and Funding Shortfall

On August 6, 2020, the Congressional Research Service (CRS) released its report, Social Security: Economic Growth and the Funding Shortfall.  In the report, CRS presents the: 1) current status of the Social Security trust funds; 2) projections for the factors in real economic growth; and 3) how projections for these growth factors are estimated to affect the Social Security program’s financial status.

Under current law and benefit structure, the Social Security program is estimated to pay full scheduled benefits until 2035.  If the trust funds’ asset reserves are depleted, the program’s benefit payments would depend totally on continuing tax revenues.  To avoid a funding shortfall, some policy option considerations would include: 1) increasing revenues (e.g., increase payroll taxes); and 2) decreasing benefits (e.g., increase the normal retirement age). 

The trustees demonstrated that the projected funding shortfall is partially due to demographic and economic factors.  The program’s financial health would benefit from increases that affect economic growth (such as total employment, average hours worked and productivity).  However, due to current economic (i.e., low productivity and low real wage growth) and demographic factors (i.e., population aging), it is unlikely these factors would result in real economic growth that would avoid the projected shortfall. 

The report concludes, “The trustees’ intermediate assumptions, their best estimates as to the program’s future experience, suggest that low growth is contributing to the projected financial shortfall (the trustees’ intermediate assumptions reflect their understanding of the program at the beginning of 2020 and do not reflect any potential effects of COVID-19).  Although increases in real economic growth would benefit both workers and the program as a whole, these alone would not likely result in a permanent solution to the projected financial shortfall.”

The report is available here.

CRR Compares Public Sector Workers’ Disability Insurance Benefits to Those Provided by Social Security

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CRR Compares Public Sector Workers’ Disability Insurance Benefits to Those Provided by Social Security

On August 4, 2020, the Center for Retirement Research at Boston College (CRR) released its issue brief, How Do DI Benefits for Uncovered Public Workers Compare to SSDI?  The brief compares the disability insurance (DI) benefits for uncovered state and local workers to the benefit that workers would have earned from the Social Security Disability Insurance (SSDI) program.  CRR analyzed the rules governing DI benefits in 67 state and local programs (known as “Social Security-replacement” programs) that include about 70% of all uncovered public sector workers.

Key findings include:

  • About 25% of state and local workers are not covered by Social Security and get their disability insurance (DI) from their current employer.
  • Most state and local DI programs provide relatively generous protection.
  • Typically, long-tenured employees that are at greater risk of experiencing a disability have higher benefit replacement rates.
  • By comparison, state and local DI programs require that workers are incapable of performing their current job, while Social Security requires that workers are unable to perform any job.

The brief concludes, “older workers who spend their full careers in government earn benefits that are more generous than SSDI.  Their short-tenured colleagues fare better than SSDI, but older short-tenured workers who are most at risk of needing DI and also likely to be eligible for a partial SSDI benefit earned through previous covered employment.”

CRR created a new dataset to compare the state and local DI programs to Social Security based on eligibility standards and benefit provisions.  The dataset will be available for public use on their website in the fall of 2020.

The brief is available here.

GRS Consultants to Serve as Speakers for FPPTA’s Virtual Learning Series

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August 26, 2020

GRS Consultants to Serve as Speakers for FPPTA's Virtual Learning Series

Brad Armstrong and Pete Strong will present the topic, “Prudent Risks & Governance for Florida Public Pension Plans” as part of the Florida Public Pension Plan Trustees Association (FPPTA) Virtual Learning Series.  The session will be held on Wednesday, August 26, 2020 from 2:00 pm-3:00 pm (EST).  

Public sector pension board trustees’ responsibilities include making strategic decisions to ensure the long-term security of pension benefits for plan members. Using plan governance principles as a blueprint, trustees can carry out a sound, unbiased, and thorough process which results in decisions that best respond to each pension plan’s unique situation. During this presentation, the speakers will take you through a 10-year journey of two very similarly situated pension plans, the choices each plan makes, and the impact of those choices on long-term funding and plan sustainability.

For more information: https://fppta.org/fppta-virtual-learning-series/