Groom Law Provides Update on Health Care Deadlines Suspended Due to COVID-19

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Groom Law Provides Update on Health Care Deadlines Suspended Due to COVID-19

On February 18, 2021, the Groom Law Group released its brief, Breaking Down the “Outbreak Period” Extensions: Clock May Begin Ticking Soon for Important Deadlines Suspended Due to COVID-19. The brief covers guidance related to the COVID-19 pandemic that was issued by the Departments of Labor (“DOL”) and Treasury (together the “Departments”) on April 29, 2020. The guidance extended certain deadlines related to retirement, health and welfare plans in response to the COVID-19 pandemic. Some of the guidance was federal regulations (the “Final Rule”), which extended the deadlines to elect COBRA, pay COBRA premiums, elect HIPAA special enrollment, and file benefit claims, appeals, and external review requests during the “Outbreak Period” related to COVID-19. The brief refers to the suspension of those deadlines as the “Outbreak Period Extensions.”

According to the brief, “There has been significant confusion regarding how employers, plans, and administrators should administer the Outbreak Period Extensions, and with the COVID-19 crisis continuing to drag on, there are many questions regarding when the Outbreak Period Extensions will expire. Adding to the confusion is a one-year statutory limit that applies to extensions mandated by the Departments. Since the Outbreak Period Extensions were first effective as of March 1, 2020, that one-year limit will be up shortly…. [W]hile the Departments have not provided any further guidance on this issue, plans and plan administrators should decide whether to end the extensions on midnight on February 28, 2021 based on this one-year limit.”

The brief is available here.

NIRS Releases Report on Americans’ Views on Retirement Insecurity

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NIRS Releases Report on Americans’ Views on Retirement Insecurity

On February 18, 2021, the National Institute on Retirement Security (NIRS) released its report, Retirement Insecurity 2021: Americans’ Views of Retirement. NIRS conducted the survey of working-age Americans on numerous retirement security issues related to the shifting retirement landscape.

The key findings include:

  • The COVID-19 pandemic has increased the majority of Americans’ concerns about financial security in retirement;
  • 67% of those that have changed or considered changing when they will retire reported that they plan to retire later than originally planned;
  • 79% of Americans are highly supportive of Social Security and some support expanding the program; and
  • 76% of Americans have favorable views about defined benefit pensions and 65% view pensions as being better than 401(k) savings accounts for providing retirement security.

The report is available here.

CRS Releases Overview of Health Insurance Exchanges

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CRS Releases Overview of Health Insurance Exchanges

On February 16, 2021, the Congressional Research Service (CRS) released its report, Overview of Health Insurance Exchanges. The report includes an overview of the key factors of health insurance exchanges, which covers: 1) the types and administration of exchanges and the plans sold in them; 2) the individual and small business exchanges eligibility and enrollment, plan costs and financial assistance available to eligible consumers and small businesses, insurer participation, and other topics;  3) the types of enrollment assistance available to exchange consumers; and 4) information on federal funding for the exchanges.

The report also includes appendixes with further details and identifies exchange types by state.

The report is available here.

NASRA Updates Brief on Public Pension Plan Investment Return Assumptions

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NASRA Updates Brief on Public Pension Plan Investment Return Assumptions

In February 2021, the National Association of State Retirement Administrators (NASRA) updated its standing issue brief, Public Pension Plan Investment Return Assumptions.  NASRA examined public pension investment return data and found that, on average over the past 25 years, public pension funds have exceeded their assumed rates of investment return. The brief finds that for the 25-year period ending December 31, 2020, the median actual annual public pension fund investment return was 7.8% and for the 30-year period was 8.6%.

In addition, the brief finds that recent changes in economic and financial conditions have caused many public plans to reexamine their investment return assumptions. Since fiscal year (FY) 2010, more than 96% of the 130 plans included in the Public Fund Survey have lowered their return assumptions. While the dominate investment return assumption ranges from 7.0% to 7.5% for the 130 plans, the average return assumption is 7.23% in FY 2021. The brief also provides a table showing the investment return assumptions that are in use, or announced for use, by the 130 plans included in the Public Fund Survey as of February 2021.  

The brief also discusses how the investment return assumption is established and evaluated. It then compares these assumptions with public funds’ actual investment experience and the challenging investment environment for public retirement systems. 

The brief emphasizes that a governmental plan’s investment return assumption is focused on the long-term, typically an investment horizon of 30 to 50 years. Investment returns are important because investment earnings account for a majority of the revenues received by most public pension plans. According to the brief, since 1989, public pension funds have accrued an estimated $8.3 trillion in revenue. Of that amount, investment earnings account for $5.1 trillion (61%), employer contributions account for $2.2 trillion (27%), and employee contributions account for $978 billion (12%). 

Typically, a 25-basis point reduction in the investment return assumption will increase the cost of a plan that has a cost-of-living adjustment (COLA) by 3% of pay (i.e., a reduction from 7.5% to 7.25% will increase the cost from 10% to 13% of pay). For a plan without a COLA, the return assumption will increase the cost by 2% of pay.

“The investment return assumption is the single most consequential of all actuarial assumptions in terms of its effect on a pension plan’s finances. The sustained period of low interest rates since 2009, combined with lower projected returns for most asset classes, has caused many public pension plans to reduce their long-term expected investment returns.” 

The brief is available here.

SLGE Releases Updated Report on the Impact of COVID-19 on Public Employee Views on Finances and Employment

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SLGE Releases Updated Report on the Impact of COVID-19 on Public Employee Views on Finances and Employment

On February 2, 2021, the Center for State and Local Government Excellence at ICMA-RC (SLGE) released its report, Update on Public Sector Employee Views on Finances and Employment Outlook Due to COVID-19: May vs. October 2020. This report contains the results of a follow-up national survey from the previous one conducted in May 2020. The survey assesses state and local government employees’ views on the impact of the COVID-19 pandemic and economic crisis on jobs, finances, and satisfaction with employers and employee benefits.

According to the most recent survey, 52% of state and local employees reported feeling stressed; 47% felt burnt out and fatigued; 44% were anxious at work; and 54% have been negatively impacted financially by the pandemic. The online survey of over 1,200 state and local government employees was conducted by SLGE and Greenwald Research.

The report is available here.

NCPERS Releases 2020 Public Retirement Systems Study

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NCPERS Releases 2020 Public Retirement Systems Study

On January 19, 2021, the National Conference of Public Employee Retirement Systems (NCPERS) released the results of its 2020 NCPERS Public Retirement Systems Study. The comprehensive survey provides information on investment experience, actuarial assumptions, plan administration and operations, trends, innovations and best practices. 

The key findings include: 

  • Due to the COVID-19 pandemic, 58% of pension systems allowed board members to participate and vote by teleconference or phone, up from 19% in 2019. About 54% offered live webinars to members and 19% were considering implementing such conferences.
  • During 2020, the average funding levels (the value of the assets in the pension plan divided by an actuarial measure of the pension obligation) rose slightly. Average funding levels increased to 75.1% in 2020 from 72.4% in 2019. 
  • In 2020, the average investment return assumption was 7.26% compared to 7.24% in 2019. About 69% of responding funds reported that they have reduced their actuarial assumed rate of return or are considering doing so in the future.  
  • About 35% of reporting funds have implemented or are considering implementing higher age and service benefit requirements, while 46% have increased employee contributions or are considering implementing that change in the future.
  • Overall, the reporting funds experienced solid returns, with the 10-year average returns exceeding the assumed rate of return and the 20-year returns falling below the assumed rate of return. On average, 20-year returns were 6.3%, 10-year returns were 8.7%, 5-year returns were 6.8%, and 1-year returns were 8.1%. Importantly, the funds with a December end-date reported significantly higher 1-year returns at 16.8% than those with non-calendar fiscal years.
  • Pension funds increased the cost of administering funds and paying investment managers to 60 basis points (or 60 cents per $100 invested) versus 55 basis points in 2019. This is comparable to the average fee of 62 basis points for hybrid funds. 

The survey included 138 state and local government pension funds with more than 12.8 million active and retired members and total assets exceeding $1.5 trillion in actuarial and market value.  Of the pension funds surveyed, 49% were local government funds and 51% were state pension funds.

The report is available here.