CRR Examines Whether Public Workers Without Social Security Get Comparable Benefits

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CRR Examines Whether Public Workers Without Social Security Get Comparable Benefits

On April 27, 2021, the Center for Retirement Research (CRR) at Boston College released its issue brief, Do Public Workers Without Social Security Get Comparable Benefits? As discussed in the brief, federal standards require that state and local plans provide benefits for their noncovered workers that are equivalent to Social Security at the full retirement age. In the issue brief, the CRR examines: 1) whether the plans satisfy the federal standards; and 2) whether the standards ensure equivalent benefits. 

The key findings include:

  • Currently, about 25% of state and local workers are not covered by Social Security.
  • The results indicate that public plans do adhere to the federal standards.
  • However, the report suggests that a substantial portion are lacking in equal lifetime benefits for some of their members.
  • Various policy options for consideration may include updating the standards to a lifetime measure or potentially requiring all public workers to be covered by Social Security.

The report concludes that to help policymakers ensure Social Security-equivalent protections for state and local employees, “A practical first step might be to update the Safe Har­bor defined benefit requirements to specify reasonable vesting periods and provide full COLAs. Alternatively, legislators could obviate the need for federal generosity standards by enrolling all state and local employees in Social Security – a common feature in many pack­ages of proposed changes to improve Social Security’s finances.”

The report is available here.

Groom Law Group Addresses the Applicability of COVID-19 Relief Provisions for Health and Welfare Plans

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Groom Law Group Addresses the Applicability of COVID-19 Relief Provisions for Health and Welfare Plans

On April 26, 2021, the law firm of Groom Law Group released its announcement regarding the publication of their article in Thomson Reuters’ Practical Law Employee Benefits & Executive Compensation. The article, “Applicability of COVID-19 Relief Legislation and Guidance to Health and Welfare Plans Chart,” addresses the application of certain COVID-19 legislative relief provisions for health and dependent care flexible spending accounts (FSAs) and COBRA health plan continuation coverage that was enacted and issued in response to the pandemic.

Specifically, the article provides a chart that summarizes the provisions applicable to various health and welfare arrangements related to the health and dependent care FSA and Health Insurance Portability and Accountability Act (“HIPAA”) special enrollment, claims and appeals, and COBRA-related relief.

The article is available here.

EBRI Publishes Retirement Confidence Survey Results for 2021

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EBRI Publishes Retirement Confidence Survey Results for 2021

On April 22, 2021, the Employee Benefit Research Institute (EBRI) published its report, 2021 Retirement Confidence Survey Summary Report. The 31st annual survey found that workers’ overall confidence in retirement security remains high despite the COVID-19 pandemic which has created great uncertainty in the labor and financial markets.  

According to the survey, 80% of retirees are confident in their ability to live comfortably throughout retirement, up from the 76% from 2020. In addition, 72% of workers are confident in their ability to retire comfortably, up 3 percentage points from 2020.

Overall, most workers are satisfied with their workplace retirement savings plans, while their contributions and investments remained largely unchanged during the past year. Due to the pandemic, about 22% of workers adjusted the age at which they plan to retire. Of those workers, 17% reported they plan to retire later while only 5% reported they plan to retire earlier.

A key difference found in the survey was that the pandemic increased confidence in both Social Security and Medicare. The survey found that confidence in Social Security continuing to offer benefits reached an all-time high of 72% for retirees and 53% for workers, while confidence in Medicare was 75% for retirees and 60% for workers.

The summary report is available here.

S&P Global Ratings Assesses Pension Risk Sharing for State Governments

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S&P Global Ratings Assesses Pension Risk Sharing for State Governments

On April 21, 2021, S&P Global Ratings published its report, Pension Spotlight: Risk Sharing Dilutes Pension Burden for Five States. In the report, S&P Global Ratings assesses pension risk sharing for state governments by examining five states’ plan designs in Oregon, South Dakota, Tennessee, Utah and Wisconsin.

The selected states have defined benefit plans that contain unique contribution volatility risk-sharing features. S&P Global Ratings studied how these features may affect credit analysis within each state.

According to the report, “State governments reduce pension stress when they share contribution volatility risk because the budgetary impact of poor returns doesn’t fall solely on the sponsor. Sharing risk can offset some negative credit views of high return assumptions because it limits associated market volatility. Affordability through risk sharing features often leads to improved funded ratios.”

The report is available here.

DOL Issues New Cybersecurity Guidance

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DOL Issues New Cybersecurity Guidance

On April 14, 2021, the U.S. Department of Labor (DOL) issued new guidance to address the cybersecurity practices of retirement plan sponsors, plan fiduciaries, record keepers and plan participants. The DOL’s first cybersecurity guidance package provides three separate documents, including: 1) Tips for Hiring a Service Provider, 2) Cybersecurity Program Best Practices, and 3) Online Security Tips. 

While the guidance is applicable to ERISA plans, it also highlights that responsible plan fiduciaries have a duty to mitigate cybersecurity risk. As a result, the new guidance may potentially affect how all plan fiduciaries are viewed. Plan sponsors are also being warned of a rise in retirement plan litigation related to cyberattacks.

The DOL press release is available here.

AAA Issues Brief on Telehealth After COVID-19

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AAA Issues Brief on Telehealth After COVID-19

On April 14, 2021, the American Academy of Actuaries (AAA) published its issue brief, Telehealth After COVID-19. Due to the COVID-19 public health emergency, the use of telehealth increased to limit the in-person health care utilization. Policymakers and regulators are considering new or revised public policies related to the availability and costs for current and future telehealth services particularly in a post-pandemic health system. In addition, the brief discusses that the other factors that need to be considered include the effects of telehealth on access to care, the costs of care, health outcomes, and potential fraud.

The brief concludes, “The fundamental considerations of how telehealth affects patient outcomes and the total cost of quality care and what characteristics influence the extent and timing of those effects needs investigation. The results of such research should help monitor quality, predict utilization, and ultimately help quantify how the total cost of care will change.”

The brief is available here.

NASRA Updates Brief on State and Local Government Contributions to Statewide Pension Plans for Fiscal Year 2019

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NASRA Updates Brief on State and Local Government Contributions to Statewide Pension Plans for Fiscal Year 2019

On April 7, 2021, the National Association of State Retirement Administrators (NASRA) updated its issue brief, State and Local Government Contributions to Statewide Pension Plans: FY 19. The brief includes: 1) a brief history of public pension contributions; 2) recent public employer contribution experience; and 3) how governance structure may impact funding experience. 

According to the brief, “[On] a national basis, contributions made by employers – states and local governments – in 2019 accounted for nearly three-fourths of all contributions received by public pension plans…. [Of] the $8+ trillion in public pension revenue since 1990, 39 percent, or more than $3 trillion, came from contributions paid by employers and employees.”

On average, employer contributions to public pension plans continue to be a small percentage of state and local government spending. In recent years, employer contributions have been growing. Among the statewide pension plans included in the study, the aggregate public employer contributions increased from $116.6 billion in Fiscal Year (FY) 18 to $121.9 billion in FY 19, up 4.9%. 

The update introduces a new analysis which compares the Actuarially Determined Contribution (ADC) experience for the plans for the two halves of the most recent 10-year period of available data. The analysis illustrates the significant improvement of public employers contributing to public pension plans over the last five years.

According to NASRA, “the median percentage of ADC received in FY 19 was 100 percent, and the dollar-weighted average was 95 percent. FY 19 marks the fifth consecutive year in which the aggregate ADC experience was higher than 90 percent.”

Furthermore, NASRA cited that, “Following the recession of 2007-09 and the market decline of 2008-09, many public pension plans have made changes to their funding policies and practices that have produced increases in required contributions in subsequent years, including implementation of more conservative (aggressive) funding policies; lower investment return assumptions; updated mortality assumptions; and reduced amortization periods.”

For the individual plans included in the analysis, the brief also provides an appendix with the basis of employer contributions and contribution history for FY 10 to FY 19.  

The brief is available here.

April 2021

IN THIS ISSUE

• Legislative Update
• ESG Update
• Basics on Additional Service Credits for Governmental Pension Plans Under IRC 415(n)
• White v. United Airlines, Inc. Fuels Split on Military Leave
• Legal Challenge to Minnesota County Deferred Compensation Plan Administration
• New COBRA Subsidies Under the American Rescue Plan Act
• New FSA Guidance
• FAQs About FFCRA and CARES Act Implementation Part 44
• Surprise Billing Provisions of the Consolidated Appropriations Act

Priest Retirement: “Plan of the Future” Ideas and Considerations

Understanding changes in the benefits landscape in the last 50 years can help Dioceses update 1970’s-era benefit policies and better prepare priests for retirement. This article provides a comparison of priest retirement benefits as they appear today versus when they were initially developed in the 1970s. The article concludes with an overview of the “Plan for the Future.”