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Study Dives Into Strategies of Best-Funded Public Pensions

Center for State and Local Government Excellence released a study last week examining the practices of the best-funded public pension plans in the United States.

The report, titled “Success Strategies for Well-Funded Pension Plans,” attempted to determine if the best-funded pension plans utilized the same strategies to achieve their success.

The report found that there were several keys to maintaining a well-funded pension system: using realistic actuarial assumptions, occasionally adjusting benefits and maintaining residence in a state that makes its full required contributions to the pension system.

BenefitsPro summarized the findings:

The study indicated that each of the systems employed various strategies for making good on the basic concept of a thorough commitment to pension funding, for example:

* The Delaware Public Employees’ Retirement System employs what the study called “a solid and consistent investment strategy that does not change when markets are volatile,” which allowed the system to weather the 2008-2009 financial crisis.

* The Illinois Municipal Retirement Fund has the political authority to enforce the collection of annual required contributions from those government bodies that participate, and can in fact sue government entities for failing to pay in, or ask the state to withhold funding until payment is rendered.

* The Iowa Public Employees’ Retirement System takes what the study called “incremental actions to reduce the unfunded liability to maintain the plan’s long-term fiscal health.”

* North Carolina Retirement Systems consistently employs the use of conservative actuarial assumptions — for example, a 7.25 percent return on investments — and also requires a full actuarial analysis of any proposal that could potentially have an impact on costs or benefits.

Elizabeth K. Kellar, president and CEO of the Center for State and Local Government Excellence, said the findings of the case studies illustrated “the importance of basing a government’s pension funding policy on an actuarially determined contribution, being disciplined about making required contributions, and clearly reporting how and when pension plans will be funded.”

The funding ratios of the featured plans were as high as 99 percent.

Read the full report here.

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Urban Institute Launches Public Pension Tool – “Build Your Own Pension Plan”

The Urban Institute has released its “Build Your Own Pension Plan” tool, which allows users to construct and analyze the costs and benefits of self-made pension plans.

The tool, outlined by Pensions & Investments:

State and local governments dealing with pension challenges can use a new tool from the Urban Institute in Washington to model possible changes.

The independent think tank released on Tuesday the interactive tool, “Build Your Own Pension Plan.”

As part of its Public Pensions Project, the Urban Institute also has a pension report card that grades states on pension funding, retirement security for both short-term and long-term employees, and workforce incentives.

New approaches like cash balance plans and offering annuities for public-sector workers score well on the report card, said Richard Johnson, senior fellow and program director for retirement policy at the Urban Institute. While they don’t solve current underfunding woes, “they represent the kind of bold thinking needed to address the pension challenges confronting state and local governments. There are better ways of reforming pensions that can provide public servants with secure retirements and still save taxpayers money,” Mr. Johnson said in a statement.

Use the tool here.

Photo by Michael Scott via Flickr CC License

Some NY State Police Officers Use Private Jobs to Boost Public Pensions

Publicly employed police officers are often contracted to work private events—from keeping the peace at retail stores around Christmas-time, to keeping an eye on the crowds at music festivals.

But an investigation by a New York newspaper found that several police departments in the state are letting the overtime racked up at private events count towards an officer’s public pension—a practice which the state Comptroller’s Office says is not allowed.

From the Times-Union:

The state Comptroller’s Office says overtime reimbursed by a private company does not count toward an officer’s pension benefit.

But the Times Union found that several Capital Region police departments — including those in Colonie, Schenectady and Troy — report private duty overtime to the retirement system.

“I think a lot of people might be surprised to the extent with which this happens around the state,” said E.J. McMahon, president of Empire Center for Public Policy, an Albany think tank. “You can actually bolster your pension with time spent working in uniform on private time.”

Taxpayers should care about the practice, McMahon said, because pensions are lifelong payments backed by taxpayer dollars.

The legality of using private duty details as part of the pension calculation is murky. Several retirees are appealing the comptroller’s position in state Supreme Court.

The retirement of a Guilderland police officer who worked overtime at Crossgates Mall brought the issue to the attention of many Capital Region police chiefs. As a result, Guilderland stopped reporting private work to the retirement system and, last month, Bethlehem prohibited officers from working the jobs.

Albany and Saratoga Springs also comply with the comptroller’s view that private overtime is not pension eligible.

But several high-ranking police officials have publicly raised concerns about whether its fair to disallow private jobs when calculating pension benefits. From the Times-Union:

“Anytime a man or woman is in police uniform, they are on police duty, period,” Colonie Police Chief Steven Heider said.

Heider considers the officers on-duty, accountable to the police department and exposed to the dangers of police work.

Last year, Colonie police collected about $120,000 in reimbursements from private entities for police details, which Heider said are assigned by rotation. About 40 percent came from patrols at Colonie Center mall.

The town reported the wages to the retirement system as pension eligible.

Colonie requested guidance from the comptroller about whether to report the wages as pension eligible, but never heard back, Heider said. If the comptroller advises Colonie to stop, the town will, he said.

Of the seven police departments in upstate New York’s Capital Region, three departments allow private duty overtime to count toward public pensions. Officers in those departments have racked up nearly $200,000 in private duty overtime last year, according to the Times-Union investigation.

Photo by Giacomo Barbaro via Flickr CC License