early retirement | Pension360

Milwaukee County Decides Against Reducing Future Pension Payments

Last week, Pension360 covered the story of Milwaukee County pensioners who were facing benefit reductions because they had previously taken government advice that led to pension overpayments.

The County was considering docking over $10 million in future benefits from 217 public workers and retirees.

But the County Board’s finance committee on Thursday decided to scrap the plan, because they feared the lawsuits it might bring.

Board members were also sympathetic to pensioners who accepted overpayments only because they took the advice of county retirement planners.

More from the Milwaukee Journal-Sentinel:

The Milwaukee County Board’s finance committee on Thursday decided against reducing future pension overpayments amounting to an estimated $10.3 million to 217 current and future retirees.

The committee instead unanimously recommended approval of a Pension Board proposal to retroactively change county ordinances that would result in keeping the improperly high payments flowing to the group. The vote was 8-0 to adopt the Pension Board’s proposal.

An explanation of how the pensioners ended up receiving overpayments in the first place:

The group of 217 had been allowed to make purchases of extra pension credits — known as “buybacks” or “buy-ins” — under a benefit enhancement strategy.

By converting time they had worked as seasonal county lifeguards, parks workers and other part-time employees, the workers boosted their pensions under a program that skirted county laws and federal tax rules, the Milwaukee Journal Sentinel reported in 2007.

The strategy made some workers eligible for earlier retirement, free retiree health care and even a 25% pension bonus and lump sum payment.

In 2007, retirement system administrators and the Pension Board determined certain purchases of pension credits had been done in error. Board rules no longer permit purchases of pension credits.

Kentucky Pension Director: Fewer Active Workers, More Retirees Is Problem For Fund

Kentucky Retirement Systems (KRS) executive director Bill Thielen spoke in front of the state’s Pension Oversight Board on Monday, and revealed an as-yet unaddressed trend that spells bad news for the pension system.

The trend involves the balance of active workers to retirees receiving payouts – and the balance is not shifting in the pension system’s favor.

Reported by WFPL:

One problem that remains unaddressed, said Thielen, is the imbalance created by fewer employees paying into KRS and more retirees receiving benefits this year. Board members were told that between 2007 and 2014, the number of active members in the Kentucky Employee Retirement System dropped from 47,913 to 40,365, while the number of retirees grew from 33,849 to 41,223.

That difference represents $228.9 million in losses this year (not counting payouts for hazardous jobs), and Thielen said the state will see more increases in benefit payout during 2015. Overall pension benefits (for all sectors) paid “for fiscal 2014 totaled $1769.7 million compared to $1706.2 in fiscal 2013,” according to the audited data report.

“Our own staff at KRS, also. About 40-45 percent of staff will be eligible to retire,” he said, explaining that private sector wages have begun to lure state employees into early retirement as Kentucky employees go into a fifth year of wage freezes.

“Without raises, we’ll probably see a lot retire.”

The 21 percent funded KERS Non-Hazardous plan is a sub-plan of the Kentucky Retirement Systems.

Thousands of Early Retirements Coming In Indiana As New Law Takes Effect

A new law has pushed forward the retirement plans of thousands of Indiana workers, who may retire early to try and avoid lower interest rates on their monthly retirement benefits.

One state system, the Indiana Public Retirement System, said it expects 2,000 more retirements than last year, which amounts to a 25 percent increase. From the Lafayette Journal and Courier:

A law, passed by the General Assembly this spring, lowers the interest rate retirees will be paid if they choose to annuitize some of their retirement benefits, taking monthly payments for the rest of their lives rather than a lump sum.

For employees whose last day of work is before the end of August, the rate is 7.5 percent. It’ll drop to 5.75 percent thereafter and keep dropping until it’s tied to the market rate.

The change is supposed to prevent a changing world from bankrupting the system, according to INPRS documents. Concerns stem from longer life expectancies and the system’s return on investment, which is lower than the current interest rate.

While system administrators say the lower rates are necessary, the change has inspired government workers who were nearing retirement to move up their plans.

Of course, nobody knows for sure how many of those extra retirements were spurred specifically by the new law. From JC Online:

Local officials says it’s hard to judge the exact impact the new law has on retirees.

In the Lafayette School Corp. for example, 37 teachers retired this year, more than the typically 20 to 25 teachers, said assistant superintendent John Layton. But without asking each one point blank why they’re retiring, the reasons prompting that retirement aren’t always clear.

[…]

West Lafayette city human resources director Diane Foster said the change has had minimal impact on the city. The only retiree to cite that as a reason is soon-to-retire parks and recreation superintendent Joe Payne.

“Other than that I’m not aware of any other employees who have made that decision based on this,” Foster said. “It could be that if an employee is already considering retirement this may be just one more factor that could help them go ahead (and do it).”

It’s unclear how the change is impacting Lafayette. Human resources director Kim Meyer said retirement data wasn’t immediately available.

Rhondalyn Cornett, president of the Indianapolis Education Association, told the Lafayette Journal Courier that a retiree could see significantly less benefits under the new law—to the tune of $5,000 a year.

With that number in mind, it’d be surprising if the new law wasn’t at least a factor in most of these early retirements.

Photo by www.aag.com via Flickr CC License

Christie Vetoes Early Retirement Incentives for Teachers

Chris Christie used his conditional veto power to reject one portion of a broader bill that would make it easier for privately run schools to operate in New Jersey.

The portion of the bill vetoed by Christie would have given certain teachers–specifically, those likely to face layoffs in the near future–a range of perks to retire early. From NJ.com:

Gov. Chris Christie has rejected changes to the Urban Hope Act, specifically taking exception to language that would allow Camden public school teachers to retire early.

The change, he wrote in his conditional veto Monday, would put too much of a strain on an already floundering state pension system.

“The bill … authorizes early retirement incentives to certain school district employees, and may exacerbate the solvency of the pension system,” Christie wrote.

Christie asked the Legislature to reconsider the bill without the retirement incentives.

Specifically, the vetoed portion would have offered early retirement incentives to school employees in Camden, New Jersey.

The Urban Hope Act, if passed, would open the door for charter schools to operate in Camden. But the city has already had to lay off nearly 250 public school employees, and more layoffs are likely on the way.

That’s why public teacher’s unions negotiated the line item in the bill giving teachers a chance to retire early as opposed to being laid off. From NJ Spotlight:

The bill had included an expansive early retirement package that had irked some on both the Democratic and Republican sides.

Assemblyman Troy Singleton, D-Camden, had said the package was only fair in the face of expected layoffs and other cuts in Camden. The New Jersey Education Association supported the early retirement piece, but nonetheless opposed the bill overall.

But Christie called the early retirement package hypocritical at a time when the state is grappling with a pension liability crisis.

The bill now goes back to the Senate. If the legislature approves Christie’s changes, the bill will go back to Christie. He is expected to pass the bill if it stays intact.