increase employee contributions

Texas Bill Seeks to Boost Employee, Employer Pension Contributions

The Texas House of Representatives unveiled a bill on Tuesday aimed at shoring up the funding status of its pension system.

The reforms specifically target members of the Employees Retirement System (ERS), which is 76 percent funded.

The bill would boost contributions to the System for both employees and employers.

More details from the Texas Tribune:

The roughly $440 million proposal would increase how much the state and its workers contribute to the Employees Retirement System pension fund, which currently holds just 76 cents for every dollar it promises retired workers.

Employees — who gave the plan mixed reviews — would get across-the-board pay raises to ease the strain.

“This is a balanced proposal to assure that neither the state employees nor our taxpayers are expected to fix the problem on their own,” said Rep. Dan Flynn, R-Van, who chairs the House Pensions Committee.

Under the plan, employees and the state would each boost their contributions to the fund to 9.5 percent of payroll by 2017 – 2 percent more than what each would chip in otherwise. Meanwhile, workers would see a 2.5 percent pay boost.

ERS is Texas’ second-largest pension system, with 230,000 members.

ERS Executive Director Ann Bishop testified in front of state lawmakers late last year and warned that pension liabilities, if not dealt with, could hurt the state’s credit rating soon.

Chicago Pension Lawsuits Put on Hold Pending Supreme Court Ruling

Two lawsuits, both challenging the legality of recent pension reforms enacted by Chicago, have been put on hold until the Illinois Supreme Court rules on the state’s pension overhaul.

The plaintiffs filed the motion to put the lawsuit on pause, and it was approved on Thursday.

Chicago Lawyers Predict “Catastrophic Outcome” If City’s Own Pension Reforms Are Eventually Overturned

The City of Chicago submitted a brief to the Supreme Court this month supporting the legality of the state’s pension reform law.

That’s because a court decision against the pension law wouldn’t bode well for the legal standing of the city’s own set of pension reforms. Chicago’s lawyers said in the brief that a “catastrophic outcome” should be anticipated if the city’s reforms are eventually overturned.

From the Chicago Sun-Times:

Chicago faces a $300 million deficit in 2016 with shortfalls continuing “for the forseeable future” — even before piling on $20 billion in pension liabilities that have saddled the city with the “worst credit rating of any major city other than Detroit.”

And if state legislation that saved two of four city employee pension funds is overturned, a “catastrophic outcome” awaits retirees and Chicago taxpayers alike triggered by “further downgrades.”

After putting the state case on a fast-track, the Illinois Supreme Court ruled this week that it won’t have time to hear any friend-of-the court briefs.

But the city’s filing nevertheless paints the bleakest and most accurate picture yet of the financial crisis that awaits the winner of the Feb. 24 mayoral election.

“The Chicago bill should survive, regardless of the outcome of this appeal. If it doesn’t, the city’s liabilities will increase by $2.5 million a day,” Corporation Counsel Stephen Patton wrote in the Jan. 12 filing.

“The city will suffer further [bond rating] downgrades that could materially increase the cost of borrowing money essential to funding basic operations. And it could make the city immediately liable to pay hundreds of millions of dollars as a result of default and early termination of debt-related obligations.”

Chicago’s pension reform measure ended compounded COLAs for some retirees and raised employee contributions by 29 percent.

Photo by bitsorf via Flickr CC LIcense

Philadelphia Pension Debt “An Obstacle” to Long-Term Growth, Says City Oversight Board

The Pennsylvania Intergovernmental Cooperation Authority (PICA) has released a report stating that Philadelphia’s pension system will be “an obstacle” to the growth and prosperity of the city.

The report says that pension costs need to be lower and more predictable for the city to grow.

The recommendations provided in the report, as reported by Philly.com:

The report’s recommendations included:

Making all new employees join the city’s hybrid pension plan, called Plan 10, which is similar to a 401(k). Mayor Nutter tried doing this in the last round of negotiations with the municipal unions, but lost.

Abolishing the controversial Deferred Retirement Option Plan (DROP), which allows city employees to pick a retirement date up to four years in the future, then accumulate pension payments in an interest-bearing account while still earning their salary. They collect a lump sum upon retirement. Council would need to pass legislation to abolish DROP.

Increasing employee contributions to the pension fund. Civil employees contribute between 3.95 percent and 4.75 percent of their annual wages. The median employee contribution for the 10 largest American cities is 6 percent, according to the report.

Lowering expectations for the rate of future returns on investments from 7.85 percent to near 7 percent.

The city’s pension system is 47 percent funded.

Read the full report here.

Photo credit: “GardenStreetBridgeSchuylkillRiverSkylinePhiladelphiaPennsylvania” by Massimo Catarinella – Own work. Licensed under CC BY 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:GardenStreetBridgeSchuylkillRiverSkylinePhiladelphiaPennsylvania.jpg#mediaviewer/File:GardenStreetBridgeSchuylkillRiverSkylinePhiladelphiaPennsylvania.jpg

Union Leader: Solutions to New Jersey Pension Woes Are in Christie’s Hands

Dominick Marino, the president of the Professional Firefighters Association of New Jersey, penned an op-ed in Wednesday’s Times of Trenton calling on New Jersey Gov. Chris Christie to take responsibility for the state’s pension problems – and to fix them.

Marino writes:

Gov. Chris Christie continues to blame everyone for the state’s pension problems – previous governors, lawmakers, firefighters and police officers – but he refuses to take responsibility for his own actions on the issue.

Apparently, he wants the public to believe that when it comes to pensions, the buck stops elsewhere. That’s wrong and he knows it. It was Christie who, in 2011, signed a law dramatically overhauling New Jersey’s public pension system, increasing the out-of-pocket contributions from workers and mandating a seven-year schedule of state payments to get the system back in the black.

Since the 2011 signing, everyone has been doing their part to follow the law except Christie. He has decided the state simply cannot afford to live up to the terms of the law he signed and has cut $1.6 billion from the state’s obligation of $2.25 billion for the current fiscal year.

[…]

The governor can point fingers all he wants, but it will likely be up to the courts to sort through Christie’s smoke-and-mirrors approach to pensions. Three of the state’s largest pension funds are suing Christie and his administration for failing to make the legally required payments.

According to Standard and Poor’s, the problem with the pension fund is not public employees and not the economy. It’s Christie not paying his bill. This from the ratings agency: “The long-term impact of continuation of a funding policy that allows the State to contribute less than the actuarially recommended contribution could impact, at some point, the Pension Plans’ ability to meet their obligations absent significant additional contributions by the State, increased investment returns, or actions or events resulting in reductions to liabilities of the Pension Plans.”

Read the entire piece here.

Photo by Bob Jagendorf from Manalapan, NJ, USA (NJ Governor Chris Christie) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Jacksonville Pension Reform Bill, Approved by Council, Could Still Stall

The Jacksonville City Council approved the city’s long-debated reform plan last month, which increase future employees contributions to the city’s Police and Fire Pension Fund, as well as boost the city’s payments by $40 million annually.

But now the proposal is awaiting approval from the Police and Fire Pension Fund, and one big question remains: how will the city pay for its higher payments? From News4Jax.com:

The Police and Fire Pension Fund met Monday to look at the city’s proposal to deal with the $1.7 billion pension deficit and the members are stuck on a major issue: how the city will pay for it.

The Jacksonville City Council approved a plan without designating a funding source and gave the pension board a little more than a month to approve or reject it.

The pension board is debating several issues again, including whether new members should carry the brunt of reform.

Under the plan approved by the council, future police and firefighters would undergo significant changes in the way their retirement is funded. They would pay more and the city would pay more into the retirement fund to bring it in line.

The pension board previously agreed to those changes in the plan, but now it might change its stance.

The board will reportedly meet again on Jan. 5 to vote on the reform measure.

Photo by pshab via Flickr CC License

Emanuel Confident Pension Plan Will Survive Lawsuit

Four unions on Tuesday filed a lawsuit challenging Chicago Mayor Rahm Emanuel’s plan to increase pension contributions for city employees and reduce COLAs.

But Emanuel said Thursday he thinks the plan will pass legal muster, in part because he worked with dozens of unions to formulate it.

From the Chicago Sun-Times:

Two days after four unions followed through on their threat to challenge the mayor’s plan, citing the same constitutional guarantee at the core of the state case, Emanuel argued that he had no choice but to raise employee contributions by 29 percent and sharply reduce cost-of-living benefits.

“We have to do the tough things, the necessary things so people can know that they’re gonna have a retirement, which they didn’t know before because we weren’t doing and they weren’t doing the tough, necessary things to get the pension systems right,” the mayor said.

“We are both preserving and protecting the pension and doing it in a responsible way that brings both reform and revenue together to solve the problem . . . They’re challenging it, but I know we took on the challenge of under-funded pensions and addressed it head-on in a responsible way.”

Emanuel has argued repeatedly that the Chicago pension reform bill is different from the state legislation because the city changes were negotiated with and agreed to by city unions.

On Thursday, he hammered away at that point.

“Twenty-eight of 31 unions agreed to work with us . . . and 11 of them stood up and said they don’t agree with the lawsuit,” the mayor said.

“I think we were actually preserving [their pensions]. And I know the union leaders who worked with us agree because that’s why they agreed to it.”

The four unions that filed the lawsuit: Teamsters Local 700, AFSCME Council 31, the Chicago Teachers Union, and the Illinois Nurses Association.

Photo by Pete Souza

New Hampshire Supreme Court Rules State Can Increase Employee Pension Contributions

The New Hampshire Supreme Court ruled this week that the state can increase public employees’ pension contributions – even for vested workers.

Since the increased contribution rate wouldn’t lead to higher benefits for employees, unions had argued the state had violated its contract with workers.

A lower court agreed with the labor groups last year – but the Supreme Court this week overturned the lower court’s decision.

More details from Governing:

The state Supreme Court has sided with lawmakers who revamped the state retirement system in 2011, requiring public employees to increase their retirement contributions.

A Merrimack County Superior Court decision last year said lawmakers could not increase contributions for those vested in the system, contending it would essentially violate a contract between the employers and the retirement system.

The ruling said the new law would increase contributions but not change benefits, so it would violate the contract for vested employees, who are those having 10 years or more contributing to the system.

However, the Supreme Court said the law cited by the lower court in making its decision does not retroactively affect employee contribution rates.

“The narrow question before us is whether, by enacting RSA 100-A:16, I(a), the Legislature unmistakably intended to establish NHRS member contribution rates as a contractual right that cannot be modified. We hold that it did not,” wrote Chief Justice Linda Dalianis for all five justices.

The Supreme Court reversed the lower court ruling and sent the case back to superior court.

NH Retirement Security Coalition – an association of labor groups – weighed in on the ruling:

“The NH Retirement Security Coalition has long contended that promises made to our member employees should be enforced because our members uphold their promises each and every day that they go to work. The court’s decision today unfortunately allows public employers to renege on their promise of security in retirement. While this decision is disappointing, our members will continue to provide high quality service to the state and its cities, towns, and school districts,” the coalition said in a statement. “We are deeply concerned about the long term impact of this decision on the people of New Hampshire. We are carefully reviewing this decision in detail with our attorneys and members of the Coalition and we will offer further in-depth comment as soon as we are able to do so.”

Sen. Jeb Bradley, the architect of the 2011 law around which the case was centered, said he was “encouraged” by the court’s decision:

“I’m encouraged that the Supreme Court has upheld the right and duty of the Legislature to amend and improve the New Hampshire Retirement System. Unless we can address the $5 billion unfunded liability in our state pension system, both taxpayers and workers would be left with a huge financial burden,” Bradley said in a statement. “This decision affirms the Legislature’s ability to make the changes we’ll need to preserve the New Hampshire Retirement System, protect taxpayers, and maintain employee jobs.”

Senate Bill 3 increased employee contribution rates, required non-vested employees to work longer and changed the way their benefits are calculated.

Photo by Joe Gratz via Flickr CC License