long-term sustainability

CalPERS Hires Lobbying Firms to Represent Interests Before Congress

CalPERS announced Monday it has hired two lobbying firms to represent its retirement policy and market regulation interests in front of the U.S. Congress and the Executive Branch.

From a CalPERS press release:

The joint venture between Lussier Group/Williams and Jensen was selected as [CalPERS’] federal representative for retirement policy issues, and K&L Gates was selected as its federal representative for investment and financial market regulation issues.

A third firm, a joint venture of Avenue Solutions/Jennings Policy Strategies was selected in November to represent CalPERS’ health care-related interests.

“Having specialized representatives in these areas will enable us to play a stronger role in retirement and investment national policy development that will continue to enhance the long-term sustainability and effectiveness of our programs,” said Board President Rob Feckner. “We look forward to working with both of these firms and are eager to have their skill and expertise put to work for us.”

Earlier this year, the CalPERS Board directed staff to begin the search for specialized representatives in the policy areas of health care, retirement, and investments. Three firms were selected as finalists for the retirement policy representative, while two firms were selected as finalists for the investment policy representative. After a thorough review and interview process, Lussier Group/Williams and Jensen, and K&L Gates were selected by the Board this week. The selections are contingent upon satisfactory negotiations of terms and conditions in order for the contracts to be awarded.

“Engaging nationally on retirement security issues is a priority for CalPERS and an important part of our commitment to our members,” said Anne Stausboll, CalPERS Chief Executive Officer. “Having three separate and focused representatives broadens our reach and ability to influence outcomes.”

CalPERS is the largest public pension fund in the United States with assets of about $300 billion.

Photo by rocor via Flickr CC License

Kansas Seeks to Study Pension Privatization

Kansas Gov. Sam Brownback’s team is reportedly exploring options to improve the long-term sustainability of the state’s pension systems.

One option on the table: privatization.

From the Associated Press:

Two top aides to Republican Gov. Sam Brownback proposed Friday that Kansas study privatizing the pension system for teachers and government workers.

Budget Director Shawn Sullivan and Secretary of Administration Jim Clark told a joint legislative committee on pensions that “reform options” for bolstering the public pension system’s long-term health should be examined. Their list included converting pension benefits into annuities managed by a private insurer.

“It’s an idea worth pursuing,” Sullivan said after presenting the proposal to lawmakers.

The committee urged Brownback’s aides to gather more information about private companies’ experiences with such moves and present it once legislators open their next annual session Jan. 12.

[…]

Clark said with converting pension obligations into annuities, a private company assumes the long-term financial risks for a fee, while the state can provide competitive benefits at a lower cost.

At least one lawmaker and one union leader weighed in on the idea. Reported by AP:

Rep. Steve Johnson, an Assaria Republican, said the idea has merit, but, “I am not optimistic that there would be a buyer of that liability at a lower cost.”

And Rebecca Proctor, interim executive director of the largest union for Kansas government employees, said private companies’ need for profits would compete with the pension system’s drive “to generate benefits for employees.”

“Any time you put a profit motive in a state service, it’s a problem,” she said.

Last week, Gov. Brownback proposed cutting the state’s pension payment by $41 million to plug budget holes elsewhere.

Photo credit: “Seal of Kansas” by [[User:Sagredo|. Licensed under Public Domain via Wikimedia Commons

Study: Public Pensions Gained Confidence in 2014

A survey of 187 public pension plans across the U.S. and Canada suggests that funds are feeling more confident about their long-term sustainability and their “readiness to address future retirement issues.”

The survey, conducted by the National Conference on Public Employee Retirement Systems (NCPERS) and Cobalt Community Research, was released Monday.

The main findings of the survey:

– Confidence continues to grow about readiness to address future retirement trends and issues. Respondents’ overall confidence rating measured 7.9 on a 10-point scale, up from 7.8 in 2013 and 7.4 in 2011.

– Funds experienced an increase in average funded level – 71.5 percent, up from 70.5 percent in 2013. Two factors contributed to the change: average one-year investment returns of 15 percent and lower amortization periods.

– Funds continue to experience healthy investment returns: 14.5 percent for one-year investments (compared to 8.8 percent in 2013); 10.3 percent for three-year investments (up from 10.0 percent last year); 9.8 percent for five-year investments (up from 2.7 percent last year); 7.8 percent for 10-year investments (up from 7.0 percent), and 8.1 percent for 20-year investments (virtually unchanged from last year’s 8.2 percent). Funds continue to work toward offsetting sharp losses from the Great Recession in 2008 and 2009 by strengthening investment discipline. Signs point to long-term improvement in public retirement systems’ funded status.

– Public funds continue to be the most cost effective mechanism for retirement saving. The total average cost of administering funds and paying investment managers was 61 basis points. According to the Investment Company Institute’s 2014 Investment Company Fact Book, the expenses of most equity funds average 74 basis points and hybrid funds average 80 basis points.

– Funds continue to tighten benefits, assumptions and governance practices. Examples include a continued trend toward increasing member contribution rates, lowering inflation assumptions, shortening amortization periods, holding actuarial assumed rates of return and lowering the number of retirees receiving health care benefits.

– Income used to fund public pension programs came from member contributions (8 percent); employer (government) contributions (19 percent) and investment returns (73 percent).

The full summary of the study, including comments by NCPERS’ Executive Director, can be found here.