Pension Update December 20, 2012

December 20, 2012

Updates this week:

It's overwhelming: State and Municipal defined benefit pension plans doomed by fundamental flawsBloomberg BNA Pensions & Benefits Daily.  November 26, 2012.

December State Pension Litigation Update. State Budget Solutions. December 7, 2012.

KENTUCKY:  27% funded Kentucky state pension catastrophe is a warning signal to others.  State Budget Solutions.  December 14, 2012.

MARYLAND:  Legislators propose to abandon a pension funding method that has allowed the state to pay hundreds of millions of dollars less each year into the state retirement system than actuaries said was needed. December 13, 2012.

MINNESOTA: No one is monitoring overtime spiking in Minnesota. December 8, 2012. 

NEW JERSEY: State pension plan is said to be in trouble despite overhaul by Christie. New York Times. December 14, 2012.

PENNSYLVANIA:  Governor touts pension reform during sit-down. December 11, 2012. 

Defined Contribution Plan States:

  • Alaska, Michigan (Mandatory)
  • Indiana, Oregon (Mandatory DC & DB Plans)
  • Colorado, Florida, Montana, North Dakota, Ohio, South Carolina, Vermont Washington (Optional)

State by State:


  • Financial health of Alabama's two largest pension funds lags. Key measures of the financial health of the Retirement Systems of Alabama's two biggest pension funds have fallen 11 straight years, RSA records show. Those measures, which compare fund assets to future pension payments, have trailed national averages for seven years in a row. July 30, 2012.


  • Funding gap for pension system grows. November 26, 2012.
  • Treasurer's Office recalculates pension plans using a 5% rate of return. The resulting funding ratio of even the healthiest pension program drops to just 51%. Total unfunded liabilities soar to $37 billion. August 12, 2012.


  • State's seizure of private retirement plans. September 19, 2012.
  • Governor signs pension reform bill. September 12, 2012.
  • Legislature sends reform to Governor. The legislation: These changes are estimated to save between $52 billion and $72 billion over 30 years, according to CalPERS, one of the state's two largest pension funds. That was higher than estimates earlier in the week of $40 billion to $60 billion. CalSTRS, the pension fund for teachers, estimated there would be an extra $12 billion in savings on top of the CalPERS estimates. However, these revisions do nothing to solve the current more than $600 billion California unfunded pension August 31, 2012.
  • Governor Brown's pension reforms are a sham. August 28, 2012.
  • Lawmakers still working on pension reform as session deadline-August 31-approaches. August 26, 2012.
  • Even in bankruptcy, unions get special treatment. August 17, 2012.
  • State has $62 billion in unfunded retiree healthcare obligations., July 30, 2012.
  • California's unfunded pensions are close to $500 billion. July 11, 2012.



  • Newest pension plan falls short. December 5, 2012.
  • Chamber urges state leaders to pass pension reform during veto November 27, 2012.
  • Governor Quinn launches internet campaign for pension reform as Moody's and PEW give Illinois pensions the lowest rating in the U.S. According to OMB, each day the pension reform is not enacted boosts the long-term shortfall by $17.1 million. By 2016, Illinois will pay more for public pensions than for schools without comprehensive reform. November 18, 2012.
  • Pension debt more than doubles under new rules. October 31, 2012. Illinois Teachers' Retirement System bleeding out, experts say. October 31, 2012. Lawsuit filed by teachers union, others seek to overturn pension reform. October 30, 2012.
  • Volcker-Ravitch Study Says Illinois Pensions Face Insolvency. October 24, 2012.
  • TRS earned less than 1 percent on its investments last year. October 25, 2012.
  • State will be on the hook for $670 million more in teacher pensions for next budget after TRF lowered expected return from 8.5% to 8 percent. September 22, 2012. Next school crisis for Chicago is that the pension fund is running dry. September 19, 2012. No pension bailout press conference with Illinois Policy Institute. September 20, 2012.
  • S&P just lowered the state's bond rating to A-plus, keeps negative outlook, citing the potential for further erosion of the state's pension liability over the next two years and budget risks due to the Jan. 1, 2015 expiration of big income tax rate increases enacted in 2011. Illinois is the second lowest-rated U.S. state after California. Illinois has the lowest rating Moody's 29.
  • SIEU gives House Democrats Political Fund $87,000 the same day as special session on pension reform begins. August 20, 2012.
  • State Budget Solutions sends open letter to Governor Quinn: Stop legislators' pay until pension reform is passed. August 20, 2012.


  • Pension system gets $360 million infusion from budget surplus. October 4, 2012.
  • Indiana pension funds took a temporary hit last year and may not rebound as much as public workers would like, based on long-term economic trends outlined for lawmakers Tuesday. The state's public pensions collected 1 percent interest on average last year, rather than the 7 percent the Indiana Public Retirement System originally expected. The poor performance caused Indiana's unfunded pension liability to increase from $3.5 billion to $4.9 billion. August 15, 2012.


  • 27% funded Kentucky state pension catastrophe is a warning signal to others. State Budget Solutions. December 14, 2012.
  • Funding levels continue to drop for state pensions. Actuaries reported Wednesday that pension benefits for members in the state's non-hazardous retirement plan are only 27.3 percent funded this year, compared with 33.3 percent in 2011. Louisville Courier-Journal. December 6, 2012.
  • The Task Force on Public Pensions recommended last week that the state start allocating its full pension contribution by 2015, following years of severe underfunding. But the group did not propose a plan to pay for the change, which will lower costs in the long-run but drive up expenses by hundreds of millions in the first few years. November 30, 2012.
  • Kentucky business group fears time is running out on pension reform. November 12, 2012.
  • Public pension plans face insolvency without major reforms. October 29, 2012.
  • Pension bonds could save more than $1 billion, says expert. September 18, 2012.
  • Kentucky's Pension Challenges: Opportunities for Real Reform. Making costs manageable may require current employees and retirees to further share the load by either paying more in employee contributions or accepting reduced retirement benefits going forward. August 2012.
  • Governor floats idea of "hybrid" pension plans for state and county workers, allowing current employees to keep their pensions but requiring new employees to pay into a 401k fund. August 20, 2012.


  • Judge allows pension lawsuit to move forward. Pensions & Investment. December 5, 2012.
  • Facing an $18.5 billion gap, the day of reckoning looms for Louisiana's retirement systems. November 9, 2012.


  • Legislators propose to abandon a pension funding method that has allowed the state to pay hundreds of millions of dollars less each year into the state retirement system than actuaries said was needed. December 13, 2012.
  • Maryland's other pension problem. October 4, 2012.
  • Mismanaged pensions. July 9, 2012.




  • No one is monitoring overtime spiking in December 8, 2012.
  • PERA pension fund concedes December 3, 2012.
  • Can taxpayers afford pension plans? October 29, 2012.



New Jersey

New York

North Dakota

  • Senate Bill 2108 as submitted to the Governor increases member and employer contributions for the NDPERS main retirement system, Judges, defined contribution and Highway Patrol systems by 1 percentage point each in January of 2012 and 2013. The law enforcement plan increase is .5% for the member and .5% for the employer. For the main retirement plan, the two-year increases will be from 10.3% for employees to 12.3%, and for employers, from 16.7 to 18.7% of compensation. Source: North Dakota Legislature.


  • Governor signs public pension bills into law. September 27, 2012.
  • Public pension changes pass Legislature. The pension bills raise premiums, lower payouts, and tighten eligibility requirements for affected teachers, police and other public workers. Measures take effect Jan. 7, 2013. Employee contribution rates gradually increase from 10% of salary to 12.25% for those belonging to the Ohio Police and Fire Pension Fund, and from 10% to 14% for members of the State Teachers Retirement System. Members of OPERS and the School Employees Retirement System would not see an increase in September 13, 2012.



  • Business leaders join chorus of calls for pension reform. December 3, 2012.
  • Governor Kitzhaber settled on a pension reform package reducing annual inflation adjustments, reducing taxpayers' pickup of employee retirement contributions, and closing a benefit loophole for out of state retirees who do not pay taxes in OR. November 17, 2012.
  • Novy-Marx and Raugh say Oregon has $90 billion unfunded pension liability, while the state says its only $16 billion. October 24, 2012.


  • Governor touts pension reform during December 11, 2012.
  • Governor Corbett: Pennsylvania must reform public pensions or face budget crisis. November 28, 2012.
  • State budget office releases Keystone Pension Report. November 25, 2012.
  • The current payment schedule to meet pension debts requires increasing contributions from taxpayers to more than $6 billion five years from now - rising to an annual obligation of more than $8 billion 15 years from now. August 14, 2012.

Rhode Island

  • Pension cuts necessary and December 5, 2012.
  • Governor urges legislative leaders and unions to negotiate pension reform compromise. State Treasurer Gina Raimondo and House Speaker Fox would rather see the courts settle the December 8, 2012.
  • Citing $5 trillion national crisis, Boise enters pension fray. November 15, 2012.
  • Federal Judge approves Central Falls bankruptcy, allowing the residents to remain in receivership after its bankruptcy. September 7, 2012. The approval of the court drives home the message to public sector pensioners that if they don't agree to renegotiate retirement benefits, they could face steeper cuts if their city goes bankrupt. In Central Falls, the city's retirees had their pensions cut by 55%, receiving an average of $16,626 per year. September 3, 2012.

South Carolina 

  • Pension fund is down $1 billion in the last year. The 0.6% return is well below the goal of the fund. August 24, 2012.
  • Governor signs pension reform requiring state employees to contribute more to their pension plans and requiring 30 years of service to receive pensions. It also eliminates Teachers and Employee Retention Incentive Program. July 25, 2012.


  • Texas Teachers Retirement System said moving away from traditional defined-benefit plan won't shrink unfunded liabilities. The fifth-largest U.S. public pension by assets positioned that the change would widen a $24 billion gap between promised benefits and projected assets to $36 billion. September 4, 2012.


  • State pension investment cuts growth. August 23, 2012.


West Virginia 

  • Lawmakers weigh curbs on public pensions. Retirees now receive an annual pension based on years of service and the average of their three final annual salaries. The proposal increases the range of that average to five years for new hires, potentially decreasing the benefit. The biggest change shifts the contribution burden toward pensions from the state to the employees, increasing their share from 4.5 percent of their pay to 6 percent. October 15, 2012.
  • In addition to 7.5% cuts, all state agencies must shift funds to cover increase in employers' share of pensions after pensions failed to grow 7.5% annually during the 2011-12 FY. Earnings were between 0-2%, according to Budget Office Director Mike McKown. August 7, 2012