PENSIONS

Pension Update December 5, 2012

December 5, 2012

Updates this week:

  • ILLINOIS: Chamber urges state leaders to pass pension reform during veto session.ChicagandChamber.org. November 27, 2012.
  • KENTUCKY: 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. Blogs.Courier-Journal.com. November 30, 2012.
  • OREGON: Business leaders join chorus of calls for pension reform. Watchdog.org. December 3, 2012.
  • PENNSYLVANIA: Governor Corbett: Pennsylvania must reform public pensions or face budget crisis. Philly.com. November 28, 2012.
  • RHODE ISLAND: Governor is calling for both sides in the state pension lawsuit to negotiate even as the case moves through the courts. WPRI.com. December 3, 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:

Alabama

  • 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. AL.com. July 30, 2012.
  • Senate approves pension reform that affects new hires. Wncftv.com. April 10, 2012.

Arizona

  • Funding gap for pension system grows. BusinessWeek.com. 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. AZcentral.com. August 12, 2012.

California

  • State's seizure of private retirement plans. Foxandhounds.com. September 19, 2012.
  • Governor signs pension reform bill. OCRegister.com. 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 liability.MercuryNews.com. August 31, 2012.
  • Governor Brown's pension reforms are a sham. Investors.com. August 28, 2012.
  • Lawmakers still working on pension reform as session deadline-August 31-approaches. Bakersfieldnow.com. August 26, 2012.
  • Even in bankruptcy, unions get special treatment. Reason.com. August 17, 2012.
  • State has $62 billion in unfunded retiree healthcare obligations. CACS.org, July 30, 2012.
  • California's unfunded pensions are close to $500 billion. OCregister.com. July 11, 2012.
  • Pension fund is down 4.8% this year. Bloomberg.com. June 11, 2012.
  • California unions sue to prevent pension reforms as citizens turn against them.Reason.com. June 6, 2012.

Connecticut

  • Gov. Malloy plans topump more money annually into the underfunded pension fund. Malloy says the various moves would save taxpayers nearly $6 billion over the next 20 years, but the legislature's nonpartisan fiscal office said recently that one of Malloy's calculations on pensions was wrong by $3.1 billion over 20 years. Courant.com.February 8, 2012.

Florida

Hawaii

  • Legislature adjourns after passing $11.2 billion budget, altering state pension scheme. Honolulu Star Advertiser. May 4, 2012.

Idaho

  • Judicial pension reform plan goes to Governor. Legislation requires for increases in court fees and retirement contributions to offset the deficit. Idaho Press-Tribune. March 29, 2012.

Illinois

Indiana

  • Pension system gets $360 million infusion from budget surplus. Mydesert.com. 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. IndyStar.com. August 15, 2012.

Iowa

Kansas

Kentucky

  • 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. Blogs.Courier-Journal.com. November 30, 2012.
  • Kentucky business group fears time is running out on pension reform. WKYUFM.org. November 12, 2012.
  • Public pension plans face insolvency without major reforms. Kentucky.com. October 29, 2012.
  • More debt (pension bonds) isn't answer to pension mess. State-Journal.com. September 23, 2012.
  • Pension bonds could save more than $1 billion, says expert. Courier-journal.com. September 18, 2012.
  • Legislative panel considers bond issue to shore up troubled pension systems.Courier-Journal.com. September 2, 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. PewStates.org. 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. Wkyufm.org. August 20, 2012.

Louisiana

  • Facing an $18.5 billion gap, the day of reckoning looms for Louisiana's retirement systems. NOLA.com. November 9, 2012.
  • On retirement, Governor Jindal cast as a major victory approval of a bill that would grant newly hired state workers a 401(k)-style "cash balance" plan, rather than a traditional defined-benefit pension. Jindal failed to win support for any measure that would apply to existing workers. Nola.com. June 4, 2012.

Maryland

Massachusetts

Michigan

Minnesota

Missouri

Montana

New Hampshire

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.

Ohio

  • Governor signs public pension bills into law. Dispatch.com. September 27, 2012.
  • Senate agreed with House changes on pension reform and sent bill to Governor. Thecincinnatiherald.com. September 22, 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 contributions..CBSNews.com. September 13, 2012.

Oklahoma

  • It's time for government pension reform in Oklahoma. Ocpathink.org. October 4, 2012.
  • A constitutional amendment advocated by state Rep. Randy McDaniel aims to enshrine in fundamental state law firm protections of sound principles of financial management, including a ban on "raids" of pension plan assets for any use other than retirement benefits, a requirement that all pension plan investments be diversified and professionally managed to limit risk, an actuarially required contributions mandate, and a mandate for legislative actuarial investigations prior to future benefit hikes. CapitolBeatOK.com. March 3, 2012.

Oregon

  • Business leaders join chorus of calls for pension reform. Watchdog.org. 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. Oregonlive.com. November 17, 2012.
  • Novy-Marx and Raugh say Oregon has $90 billion unfunded pension liability, while the state says its only $16 billion. Statesmanjournal.com. October 24, 2012.
  • Treasurer sends letter to Board of Oregon PERS asking them to lower the 8% assumption on investment returns, cap the annual cost of living increases, and eliminate the practice of paying out-of-state retirees extra benefits. Oregonlive.com. July 26, 2012.

Pennsylvania

  • Governor Corbett: Pennsylvania must reform public pensions or face budget crisis. Philly.com. November 28, 2012.
  • State budget office releases Keystone Pension Report. WHPTV.com. November 25, 2012.
  • Principles for public pension reform.CommonWealthFoundation.org. August 30, 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. PennLive.com. August 14, 2012.
  • Annual pension payments on benefits for public schoolteachers and state employees grew by more than $500 million this year. They're scheduled to increase by another $700 million next year, which will easily eclipse the $300 million projected surplus. If the state does nothing to adjust the cost of its $30 billion-and-growing unfunded liability on that benefits system, the annual price tag will be more than 10 percent of the state's budget. Post-Gazette.com.July 8, 2012.

Rhode Island

  • Governor is calling for both sides in the state pension lawsuit to negotiate even as the case moves through the courts. WPRI.com. December 3, 2012.
  • Citing $5 trillion national crisis, Boies enters pension fray. ThompsonReuters.com. November 15, 2012.
  • Federal Judge approves Central Falls bankruptcy, allowing the residents to remain in receivership after its bankruptcy. CBSnews.com. 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. Reuters.com. September 3, 2012.
  • Unions file 3 lawsuits to challenge RI pension reform. Reuters.com. June 22, 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. Thestate.com. 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.
  • Legislature approves compromise on pension reform, exempting current employees. New employees, however, must meet a "rule of 90" to earn full benefits, meaning that the worker's age and years of service must equal 90 at the time of retirement. Employees' contributions increase by 1.5% points over three years, taking effect July 1, 2013. TheState.com. June 21, 2012.

Texas

  • 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. Bloomberg.com. September 4, 2012.

Virginia

  • State pension investment cuts growth. Virginiawatchdog.org. August 23, 2012.
  • General Assembly approved governor's amendments to pension reform bills. TheRepublic.com. April 18, 2012.

Washington

  • Pension ruling could undermine state budget. TheOlympian.com. November 20, 2012.
  • Senate passes SB 6378 requiring all new employees as of July 1, 2012 enroll in the state's newest retirement plan. The Senate also delayed funding $130 million to a pension plan closed to new enrollment in 1977.SRC.com. March 3, 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. Register-Herald.com. 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. WVGazzette.com. August 7, 2012

Wisconsin