Pray Hochul won’t cave to union calls for a big pension giveaway — at NY taxpayer expense

Link: https://nypost.com/2022/03/11/pray-hochul-wont-cave-to-union-calls-for-a-big-pension-giveaway/

Excerpt:

Tuesday will be the 10th anniversary of a state legislative landmark: the creation of a new public-pension “tier” reining in the explosive cost of state- and local-government retirement benefits in New York.

While Tier 6 wasn’t the “bold and transformational” breakthrough touted by then-Gov. Andrew Cuomo in 2012, it was a solid net positive for taxpayers, building on incremental changes in the Tier 5 pension reform enacted two years earlier. (Tiers 5 and 6 cover most occupations other than police and firefighters, who belong to other pension plans modified in different ways by the same legislation.)

The reforms have saved billions of taxpayer dollars for the state and local governments over the past decade — including $1 billion this year alone — plus significant added savings for New York City’s separate pension systems.

The state’s well-fed public-sector unions tried to block pension changes at every turn. Now, under the slogan “Fix Tier 6,” they’re pushing the Legislature to roll back pension reform as part of the budget for the fiscal year that starts April 1.

The “fix” sought by the 200,000-member Civil Service Employees Association and other government unions is a return to the state’s enriched pre-2010 pension plans, which (among other sweeteners) required no employee pension-fund contributions after 10 years and allowed for early retirement on full pensions as early as age 55 after a minimum 30 years of service.

Author(s): E.J. McMahon

Publication Date: 11 Mar 2022

Publication Site: NY Post

‘We Don’t Have Actuarial Numbers Relative To This Amendment’: Illinois’ Tier 2 Pension In Their Own Words

Link: https://www.forbes.com/sites/ebauer/2022/02/20/we-dont-have-actuarial-numbers-relative-to-this-amendment-illinois-tier-2-pension-in-their-own-words/

Excerpt:

In Illinois, this resulted in a Blue Ribbon Pension Commission under Gov. Rod Blagojevich, which issued a report in 2005 with some recommendations which were adopted and others which, well, never saw the light of day. As might be guessed, the changes actually implemented were small scale, but included an anti-spiking measure, a reduction in the guaranteed interest rate used to calculate a minimum pension benefit, and a reduction in the categories of state employees eligible for the more generous alternative formula. This legislation, Public Act 94-0004, also required that any new benefit increase henceforth must be paired with a corresponding funding increase, and must sunset after five years (though recall that this didn’t stop the legislature from increasing benefits for Chicago Firefighters or non-Chicago Police and Fire pensions, both of which involve the state dictating benefits and localities funding them).

In recognition of the small nature of these changes and the very large debts still remaining, the bill also created yet another commission, with no effect, and in subsequent years, still more commissions met. In 2009, the Illinois Pension Modernization Task Force held a series of public meetings, but produced no majority-approved report, only a work product with findings and minority reports.

It is in that context that the Illinois Tier 2 pension system came into being — which avid readers will recall is a new set of benefits for public-sector employees in Illinois hired after January 1, 2011, a set of benefits with changes made that “looked good” to legislators at the time but had no actuarial review, and as a result will sooner or later fail the “safe harbor” test, in which state and local public pensions must provide better benefits than Social Security in order to opt out of the Social Security system. And why didn’t the law have an actuarial review? Because it was created behind closed doors — which makes it all the more worthwhile to repeat the exercise of reading the legislative transcripts of the day it was brought to the floor of the Illinois State House and Senate for a vote.

Author(s): Elizabeth Bauer

Publication Date: 20 Feb 2022

Publication Site: Forbes

Colin McNickle: Are Pittsburgh’s pension changes prudent?

Link:https://triblive.com/opinion/colin-mcnickle-are-pittsburghs-pension-changes-prudent/

Excerpt:

The City of Pittsburgh has revised its employee pension program. But whether the moves were prudent remains an open question, concludes an analysis by the Allegheny Institute for Public Policy.

It was in December that outgoing Mayor Bill Peduto signed ordinances that eliminated a pension reduction for some city employees, modified the employee contribution rate and extended the number of years that the city will dedicate parking taxes to those pensions.

….

All this said, new ordinances return and/or add more city employees to the pension plans’ liabilities, increasing them from $87.9 million to $96.9 million, based on an actuarial analysis. And they assume a robust recovery in post-pandemic parking tax revenue to meet the pledged contribution to the pension plans.

But do remember that the 2010 ordinance states that the city’s full faith and credit are pledged to meet the parking tax obligation. “That means other sources of tax or non-tax revenue may be called upon if needed,” Montarti says.

“If the city can reach an 80% funding ratio without the inclusion of the parking tax pledge, then it is possible that the dedication of the revenue to the pensions may end earlier than 2051, based on language in the new ordinances,” he says.

….

“Why not wait until the pension funding ratio was further into that range or, even better, actually met the level of ‘no distress’ (of 90 percent or above)?” Montarti asks. “What if the stock market underperforms and the city’s pensions lose ground?”

Author(s): Colin McNickle

Publication Date: 3 Feb 2022

Publication Site: Trib Live

ILLINOIS CAN SAVE $577M ON PENSIONS BY ADDING A DATE TO A LAW

Link:https://www.illinoispolicy.org/illinois-can-save-577m-on-pensions-by-adding-a-date-to-a-law/

Excerpt:

Essentially, all pension debt stems from Tier 1 benefits promised to state employees hired before 2011, like Crenshaw. Tier 2 employees hired after 2011 will likely pay more than their benefits will be worth to subsidize Tier 1 benefits.

Implementing optional Tier 3 plans is one of the solutions to Illinois’ woes set out in the Illinois Policy Institute’s Illinois Forward 2023. The General Assembly passed Tier 3 plans during the fiscal year 2018 budget process. A technical error left an implementation date out of the language, and it hasn’t been corrected since. Lawmakers could fix this oversight for fiscal year 2023, which begins July 1, 2022.

“A lot of times we’re not given the intricacies of how a Tier 3 or alternative pension plan could benefit us,” Crenshaw said.

Author(s): Dylan Sharkey

Publication Date: 3 Feb 2022

Publication Site: Illinois Policy Institute

Lightfoot messages indicate how flippantly state government stuck Chicago with higher pension cost – Wirepoints Quickpoint

Link: https://wirepoints.org/lightfoot-messages-indicate-how-flippantly-state-government-stuck-chicago-with-higher-pension-cost-wirepoints-quicktake/

Excerpt:

You may recall earlier this year when the General Assembly passed a bill that Gov. JB Pritzker signed to increase certain pension benefits for Chicago firefighters. The new law is expected to cost Chicago some $850 million and could drop the funded status from what was an already abysmal 18% down to an even-worse 16%.

Well, it appears that Illinois Senate leadership didn’t even bother to talk to Chicago Mayor Lori Lightfoot before mandating that additional burden.

The Chicago Tribune has released Lightfoot email and text messages it obtained on a number of matters. One went from Lightfoot to Senate President Don Harmon. “A courtesy call regarding the fire pension bill would have been helpful, particularly since there is no funding for it,” Lightfoot said. “When that pension fund collapses, I will be talking a lot about this vote.”

Author(s): Mark Glennon

Publication Date: 31 Dec 2021

Publication Site: Wirepoints

The Massachusetts ‘Essential Worker’ Pension Boost Proposal Is A Case Study In Public Pension Failures

Link: https://www.forbes.com/sites/ebauer/2021/08/19/the-massachusetts-essential-worker-pension-boost-proposal-is-a-case-study-in-public-pension-failures/

Graphic:

Excerpt:

The text of the bill, H. 2808/S. 1669, is brief. All employees of the state, its political subdivisions, and its public colleges and universities, a bonus of three years “added to age or years of service or a combination thereof for the purpose of calculating a retirement benefit,” if, at any point between March 10, 2020 and December 21, 2020, they had “volunteered to work or who [had] been required to work at their respective worksites or any other worksite outside of their personal residence.”

…..

In subsequent reporting, government watchdog group The Pioneer Institute voiced its opposition. In a statement posted on their website, they criticized the broad coverage — acting as an unfunded mandate for municipalities, including workers even if they had worked outside their home for a single day, encompassing both blue collar and white collar workers. They estimate the bill’s cost at “in the billions of dollars” and point to a massive boost even for a single individual, the president of the University of Massachusetts, whose lifetime pension benefit would increase by $790,750.

…..

And left out of Zlotnik’s proposal is a recognition that the state’s main retirement fund is 64% funded, and the teachers’ fund, 52%, as of 2019.

Author(s): Elizabeth Bauer

Publication Date: 19 August 2021

Publication Site: Forbes

Claims that Illinois pension reform would fail at federal level just aren’t true: The case of Arizona – Wirepoints

Excerpt:

Perhaps one of the best examples for successful reform is Arizona’s recent effort, where the state amended its constitution and passed pension reforms to, as Arizona Gov. Doug Ducey described it, set its public safety “pension system on a path to financial stability while improving the way it serves our brave cops and firefighters.”

No federal challenges to Arizona’s reforms have been made – which is part of a longstanding pattern nationally. Dozens of states over the past several decades have reformed their public pension systems as problems became apparent over the years. None has been sued successfully under the U.S. Constitution – whether under the contract clause or any other provision – in all that time.

Author(s): Ted Dabrowski and John Klingner

Publication Date: 10 August 2021

Publication Site: Wirepoints

Illinois governor signs bill that increases Chicago’s pension liabilities

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202104061236SM______BNDBUYER_00000178-a783-de03-a7ff-b7e7bf7e0001_110.1#new_tab

Excerpt:

Illinois Gov. J.B. Pritzker signed legislation that benefits retired Chicago firefighters, rejecting city warnings adding to its already burdensome pension tab could damage ratings and drive up taxes.

The added cost to bring cost-of-living adjustments for all firefighters in tier one up to a simple 3% annual increase despite their birth date amounts to $18 million to $30 million annually and up to $823 million in full by 2055 when the fund is slated to reach a 90% funded ratio.

Pending legislation to do the same for the police fund carries a steeper price tag of up to $90 million annually and $2.6 billion through 2055.

Author(s): Yvette Shields

Publication Date: 6 April 2021

Publication Site: Fidelity Fixed Income

Puerto Rico Gov Rejects Pension Cuts in POA

Link: https://www.theweeklyjournal.com/politics/puerto-rico-gov-rejects-pension-cuts-in-poa/article_e661e724-80f7-11eb-ace6-7b42750d090c.html

Excerpt:

Puerto Rico Gov. Pedro Pierluisi reiterated his stance against the pension cuts outlined in the government’s Plan of Adjustment (POA), presented last night by the Financial Oversight and Management Board (FOMB) before the Title III Court.

“My administration has been emphatic that this cut to pensions is not reasonable and it is not necessary to confirm the Adjustment Plan, so we will leave it established in the confirmation process before the Title III Court,” Pierluisi said in written statements.

The POA is based on the agreements previously reached by FOMB with the Official Committee of Retirees (ORC) and other unions, for which it envisions a reduction of 8.5 percent in the pensions of government retirees who earn more than $1,500 per month, as stipulated by the past POA. This represents between 26 percent and 27 percent of all pensioners.

Publication Date: 9 March 2021

Publication Site: The Weekly Journal

Vermont Treasurer Calls for Pension Cuts for State Employees, Teachers

Link: https://www.ai-cio.com/news/vermont-treasurer-calls-pension-cuts-state-employees-teachers/

Excerpt:

Vermont Treasurer Beth Pearce released a report containing recommendations that she said could reduce pension UAAL for the Vermont State Employees’ Retirement System (VSERS) and the Vermont State Teachers’ Retirement System (VSTRS) by $474 million and reduce the actuarial determined employer contribution (ADEC) by $85 million.

“While shy of the total target of $604 million in the UAAL and $96.6 million for the ADEC, it is a significant reduction to the existing liabilities and costs to the taxpayer,” said the report, which added that the net other post-employment liabilities could be reduced by $1.68 billion by directing a “minimal amount” of funds for prefunding. “All in, these recommendations will reduce the state’s post-employment liabilities by $2.2 billion.”

Author(s): Michael Katz

Publication Date: 21 January 2021

Publication Site: ai-CIO

The Consequences of Current Benefit Adjustments for Early and Delayed Claiming

Abstract:

Workers have the option of claiming Social Security retirement benefits at any age between 62 and 70, with later claiming resulting in higher monthly benefits.  These higher monthly benefits reflect an actuarial adjustment designed to keep lifetime benefits equal, for an individual with average life expectancy, regardless of when benefits are claimed.  The actuarial adjustments, however, are decades old.  Since then, interest rates have declined; life expectancy has increased; and longevity improvements have been much greater for high earners than low earners.  This paper explores how changes in longevity and interest rates have affected the fairness of the actuarial adjustment over time and how the disparity in life expectancy affects the equity across the income distribution.  It also looks at the impact of these developments on the costs of the program and the progressivity of benefits.

The paper found that:

The increases in life expectancy and the decline in interest rates argue for smaller reductions for early claiming and a smaller delayed retirement credit for later claiming.

Specifically, the benefit at 62 should equal 77.5 percent, as opposed to 70.0 percent, of the full age-67 benefit, and the benefit at 70 should equal 119.9 percent, instead of 124.0 percent, of the full benefit.

The outdated actuarial adjustments are a modest moneymaker for the program – about $1.9 billion in 2018, with most of the gains coming from those claiming at 62, who are typically lower earners. Surprisingly, the correlations between earnings and life expectancy and between earnings and claiming behavior have only modest implications for both the cost and progressivity of Social Security benefits.

Finally, the cost and distributional effects of earnings-related life expectancy and claiming cannot be addressed through the actuarial adjustments for early and late claiming. They reflect the fact that high earners get their large benefits for a long time and low earners get their more modest benefits for a shorter time.

The policy implications of the findings are:

Increases in life expectancy and the decline in interest rates suggest smaller reductions for early claiming and a smaller delayed retirement credit for later claiming.

Accounting for differential mortality would involve changing benefits, and is not a problem that can be solved by tinkering with the actuarial adjustments.

PDF link to full paper: https://crr.bc.edu/wp-content/uploads/2021/01/wp_2021-3_.pdf

Authors: Andrew G. Biggs, Anqi Chen, Alicia H. Munnell

Publication Date: January 2021

Publication Site: Center for Retirement Research at Boston College