CRR Issues Brief on Public Plan Investments and COVID-19 Market Volatility

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CRR Issues Brief on Public Plan Investments and COVID-19 Market Volatility

On September 29, 2020, the Center for Retirement Research at Boston College (CRR) released its issue brief, 2020 Public Plan Investment Update and COVID-19 Market Volatility.  The brief indicates that state and local pension plans outperformed their assumed return in fiscal year (FY) 2019 with an average return of 8.9% compared to the average actuarially assumed return of 7.2%.  However, in early 2020, the financial markets were severely affected by the COVID-19 pandemic and subsequent economic shutdown.

Other key findings include:

  • Despite the financial market rebound, most public pension plans are projected to end FY 2020 with investment returns that fall below actuarial expectations.
  • The market downturn that occurred due to the COVID-19 pandemic has elevated concerns about public plan liquidity and vulnerability since plans may be forced to liquidate assets at depressed prices.

The brief concludes, “Although many plans have a negative cash flow and may need to sell assets to pay annual benefits, most also maintain a consistent cache of U.S. Treasuries that could be easily liquidated if necessary. So, while public pension plans face many long-term fiscal chal­lenges, most are able to weather sharp downturns relatively unscathed.”

The brief’s analysis is based on the Public Plans Database (PPD), which consists of 118 state and 82 local pension plans that represent over 95% of the total U.S. state and local pension assets and membership.

The brief is available here.

BLS Reports on Employee Benefits for Private Industry and Public Sector Workers in 2020

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BLS Reports on Employee Benefits for Private Industry and Public Sector Workers in 2020

On September 24, 2020, 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 2020.  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, 85% of full-time private industry workers had access with 60% 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.

CRR Examines State and Local Disability Benefit Structures for Potential Application to Social Security Disability

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CRR Examines State and Local Disability Benefit Structures for Potential Application to Social Security Disability

On September 15, 2020, the Center for Retirement Research at Boston College (CRR) published its issue brief, Could State and Local DI Programs Shed Light on Trends in SSDI?  According to the U.S. Social Security Administration, about 25% of workers will develop a work-limiting disability during their career.  For those unable to continue in the work force, certain programs such as Social Security Disability Insurance (SSDI) may assist to provide an economic safety net. The brief examines whether researchers should consider the disability insurance (DI) programs for state and local government employees to help assess whether the structure of the DI program affects claiming rates and other outcomes. 

The key findings include:

  • Typically, disability insurance programs are designed to provide income while maintaining work incentives, such as Social Security’s SSDI.
  • Policymakers should understand the design features of a DI program that would most effectively balance these dual goals.
  • In this effort, state and local disability programs can be used for further study since their eligibility criteria, administrative processes and benefit levels differ extensively.
  • The analysis suggests that this variation influences disability insurance claiming rates.

The report is available here.

NCPERS Publishes Report on Closing Public Pension Funding Gaps

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NCPERS Publishes Report on Closing Public Pension Funding Gaps

On September 15, 2020, the National Conference on Public Employee Retirement Systems (NCPERS) published its report, Ten Ways to Close Public Pension Funding Gaps.  The research report explores ten different policy options intended to help close public pension funding gaps.  According to NCPERS, “Solutions can have more staying power and impact if they address underlying, structural fiscal issues and tackle imprudent approaches to allocate state and local government revenues, including pension contributions.”

The report presents some of the policy options that stakeholders of public pensions may want to consider as they face funding challenges, such as:

  • Exploring a New Approach to Limited Pension Obligation Bonds;
  • Exploring Actions of the Federal Reserve Bank;
  • Exploring Bridge Loans to Increase Liquidity;
  • Securitizing Public Assets;
  • Exploring Dedicated Revenue Stream;
  • Establishing a Stabilization Fund;
  • Exploring Monthly Employer Contributions;
  • Exploring Consolidation;
  • Exploring Auto-triggers; and
  • Reforming Revenue Systems and Closing Tax Loopholes.

The report concludes, “These policy options are generic in nature. They are not recommendations, but they are a starting point for developing alternatives that reflect the needs and circumstances of individual pension systems and the communities in which they reside.  Each plan is unique and must explore, in consultation with experts, policy options that best fit its needs.”

The report is available here.

NIRS Releases Report on Escalating Costs and Risks During Retirement

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NIRS Releases Report on Escalating Costs and Risks During Retirement

On September 8, 2020, the National Institute on Retirement Security (NIRS) released its study report, The Growing Burden of Retirement: Rising Costs and More Risk Increase Uncertainty.  The study findings indicate that rising risk and escalating costs for housing, health care and long-term care are threatening Americans’ financial retirement security.  

Key findings include:

  • For many workers, saving early and continuously during working years can be difficult.
  • Typically, workers face various risks when they approach retirement age such as market timing, interest rate and longevity risks.
  • Although older Americans are the most likely to own a home, those age 65 and older that are cost-burdened by housing costs has risen with more having mortgage debt into retirement.
  • Healthcare costs continue to increase, but these costs are higher for older Americans since they are more likely to have multiple chronic health conditions.
  • Long-term care costs are an increasing challenge for many older Americans since those needing long-term care is projected to increase as the Baby Boomers continue retiring.

The report is available here.

NASRA Summarizes Survey Results on Work from Home Policies and Practices

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NASRA Summarizes Survey Results on Work from Home Policies and Practices

On September 2, 2020, the National Association of State Retirement Administrators (NASRA) released its report, Responses to Survey Regarding Work from Home Policies and Practices. The survey was conducted in August 2020 and covered various topics related to remote work policies for state retirement systems before and during the current pandemic environment.  The survey responses included 28 retirement systems in 24 states.  According to the survey, about 88% of respondents indicated that their retirement systems have a written policy that governs employees who are working remotely. 

A summary of the survey responses is available here.

GRS Consultants Speaking at American Academy of Actuaries (AAA) Webinar

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September 17, 2020

GRS Consultants Speaking at American Academy of Actuaries (AAA) Webinar

James Rizzo and Piotr Krekora will participate in a panel discussion on the  Exposure Draft for the ASOP 6 Practice Note titled, “Development of Age-Specific Retiree Health Cost Assumptions for Pooled Health Plans, Including Applications to Non-Pooled Health Plans.”  The webinar, sponsored by the AAA, occurs on September 17, 2020.

For more information or to register go to: https://www.actuary.org/node/13836

GRS Consultants Deliver Unique Learning Experience on Pension Plan Risks and Governance

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September 3, 2020

GRS Consultants Deliver Unique Learning Experience on Pension Plan Risks and Governance

GRS Consultants, Brad “Pepper” Armstrong, Pete “Cotton” Strong,  Shelly Jones, Dina Lerner, Nicolas Lahaye, and Jeff Amrose discuss risks and governance in a unique vignette format that is sure to keep attendees engaged as they journey through the public pension funding decision making process.

The session titled “Prudent Risks & Governance for Florida Public Pension Plans” sponsored by the Florida Public Pension Plan Trustees Association (FPPTA) Virtual Learning Series can be viewed at: https://fppta.org/prudent-risks-governance-for-a-florida-public-pension-plan/

Happy viewing and learning.