San Francisco Pension Votes to Engage With Fossil Fuel Companies Over Climate Change; Next Step Could Be Divestment

Golden Gate Bridge

The Board of the San Francisco Employees’ Retirement System (SFERS) voted Wednesday to begin engaging with the fossil fuel companies in which it invests.

The vote opens the door for an eventual vote on divesting from fossil-fuel companies altogether – an idea that is sure to receive mixed reviews from board members and city officials.

The pension fund currently holds about $540 million in fossil fuel companies, which accounts for less tan 4 percent of the fund’s entire portfolio, according to SF Gate.

More details from SF Gate:

The board voted Wednesday to go to “level-two engagement,” meaning it will actively attempt to influence the policies of the companies in which it invests. The next step would be to move forward with divesting from the companies.

“If you want to divest, you have to start somewhere,” commission President Victor Makras said. “Our mere size and name brings something to the engagement process.”

[…]

“There is some urgency,” Supervisor John Avalos, who has led the charge, told the board. “We have to take into consideration the real (climate) changes that are happening overnight.”

The counterargument is that stocks of fossil fuel companies are a component of most major index funds, and divesting from them could limit pension-fund revenues that pay for the retirement benefits of thousands of city workers.

“I don’t think I’m in a position to do that,” said Commissioner Brian Stansbury, the only one of seven board members to vote against moving to level two. Stansbury, a San Francisco police officer, expressed concern that moving the money out of fossil fuel assets would be “financially risky.”

The San Francisco Employees Retirement System manages $20 billion in assets.

 

Photo by ilirjan rrumbullaku via Flickr CC License

New Jersey Pension Commission Release Report; Proposal Would Bring Savings to State, Cuts to Workers

New Jersey Gov. Chris Christie unveiled a series of pension reform proposals at his budget address yesterday.

But he’s taking his cues from a just-released report from his pension commission, which he set up in the summer of 2014.

Christie acknowledged in mid-2014 that future pension changes would likely mean benefit cuts for workers. Now, we are getting more details about the specifics of the reforms Christie and his panel have in mind.

The five key pillars of the pension reform proposal, summarized by NJ.com:

1. Frozen Plan

The current pension plan would be frozen. Retirees would continue to receive their benefits, though without cost of living adjustments. Active employees would no longer accrue benefits under that plan.

2. “Cash balance” plan

The state would create a new “cash balance” plan, which is considered a hybrid between defined-contribution and defined-pension plans. Workers’ benefits are shown as a cash balance, funded by employee and employer contributions and investment returns, but they can take their payout as a lifetime annuity.

3. Health care premium change

Employees would pick up a larger share of their health care premiums, and health care coverage would be less generous overall. On average, employees pay 18 percent of their health care premiums. Under the proposal, that would increase to 25 percent, though higher-paid employees pay more. State and local governments pay, on average, 95 percent of the total cost of health care coverage, but the proposal calls for new health care plans that reduce the employer cost to 80 percent.

4. School plans

Local school districts would take on local education employee retirement benefits, which are currently paid for by the state, and the cost of the new cash balance plan. The commission estimates the savings from the health care cuts would more than cover those new responsibilities.

5. Constitutional amendment

Lawmakers would be asked to pass a proposed constitutional amendment that would appear on the November ballot and guarantee public employees adequate pension contributions from the state.

The commission’s report can be read here.

 

Cover photo credit: Walter Burns [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Government Panel Likely to Call For Military Pension Changes

US Army

The Military Compensation and Retirement Modernization Commission has spent the last two years drawing up policy proposals to decrease the cost of military benefits, including retirement benefits.

The Commission will make the proposals to Congress on Thursday, but people familiar with the report have already been revealing its contents to the USA Today and the Military Times.

According to the sources, the report will propose big changes to the military’s retirement system – including the phase-out of the military’s current defined-benefit plan, in favor of a hybrid plan that features characteristics of a 401(k).

More details from USA Today:

The Military Compensation and Retirement Modernization Commission will propose detailed legislation to phase out the current 20-year cliff-vesting pension payable immediately upon leaving service, according to people who have been briefed on the report but requested anonymity before discussing its recommendations.

The plan calls for Congress to create a hybrid system that includes a smaller defined-benefit pension along with more cash-based benefits and lump-sum payments. A significant portion of troops’ retirement benefits would come in the form of government contributions to 401(k)-style investment accounts, those familiar with the report told Military Times.

Specifically, the proposal calls for automatically enrolling each service member in the federal government’s Thrift Savings Plan, or TSP, an investment account that accrues savings. Individual troops will be responsible for managing their accounts, and the money is typically not available for withdrawal without penalty until age 59.5.

But that same proposal would make it easier for troops to keep their retirement benefits after leaving the military. USA Today reports:

By allowing many troops to keep their TSP government contributions after separation, the new proposal would give limited retirement benefits to the vast majority who leave the military before hitting the traditional retirement milestone of 20 years of service, most of them enlisted members who do four, six or eight years, then leave.

That’s a big potential change from a system that now offers retirement benefits to about only 17% of the force — many of them officers — who serve 20 years.

The retirement changes would only apply to new troops – not anyone currently enlisted or retired.

All of these proposals would still need to get through Congress to become law. Military compensation is a controversial area for cuts, so it’s unclear if the political will exists to move forward with the retirement system changes.

 

Photo by Brian Schlumbohm/Fort Wainwright PAO

What Congressional Gridlock Means for Federal Pensions

capitol

Gridlock has become the new norm in Congress. The last two Congressional sessions (112th and 113th) were arguably the two least-productive sessions in the history of the country.

Republicans now control both chambers, but that doesn’t mean the gridlock will end.

In fact, some observers say that in 2015, the trickle of meaningful bills coming out of either Congressional chamber could slow even further.

That could be good news for federal workers.

Why?

Because trimming federal retirement benefits is a popular idea among a group of lawmakers, and gridlock could stave off those cuts.

Federal News Radio explains:

In 2014, the to-do-list of many pols included plans to charge workers more, via payroll deduction, for their CSRS and FERS benefits. It could have resulted in a pay cut of 2, 3 or even 4 percent.

Also on the list was a big budget saver — a plan to trim future cost-of-living adjustments for current and future retirees by 0.3 percent each year, every year. People would still get COLAs. But in a diet-version.

NARFE’s Jessica Klement estimated the typical CSRS retiree would miss out on $50,000 in future benefits if the COLA calculation change was made. It wasn’t, in part because of gridlock.

[…]

There is an upside to gridlock, especially for active and retired members of the federal family. It kept politicians with political, personal or fiscal axes to grind (out of your hide) from chopping up your benefits package. Feds even got a token raise. While only 1 percent (same as this year) it was 100 percent more than they got in 2013, 2012 and 2011.

The gridlock also gives retiree advocates and labor groups more time to combat those policies.

Two lawmakers, Rep. Jason Chaffetz [R-Utah] and Rep. Mark Meadows [R-N.C.], are leading the push for civil service reform, including pension changes.

OpenRetirement covered their plans here.

Would a “Buyback” Program Help Ease Pennsylvania’s Pension Problems?

Pennsylvania

Pennsylvania is shouldering $47 billion of pension debt, according to the Governor’s Office, and that figure doesn’t include the unfunded liabilities of the state’s municipal pension systems.

No easy solution awaits. But Thomas A. Firey, managing editor of economics journal Regulation, writes on Philly.com that a “buyback” program is worth considering.

Firey writes:

The deficits have prompted calls to cut benefits, but workers and their unions reply that these promises were made in good faith – and written into contracts. It’s hard to disagree. Also hard to dispute are the concerns of state residents who point to an already heavy tax burden that makes it hard to provide for their families, let alone public employees. Finally, there are those who worry that essential services could be cut in any pension fix.

[…]

Harrisburg should create a program that would allow individual state and local public employees to voluntarily sell back some of their pension benefits in exchange for cash. If engineered correctly (perhaps using an auction mechanism), the overall savings to taxpayers could be very large, even if the state has to borrow money for the payouts.

If this program were implemented, everyone would win. Workers who sign up would get more immediate compensation, while non-participating members would see no change in their retirement benefits. The long-term pension cost to taxpayers would be reduced, and lawmakers would be under less pressure to cut government programs.

The new governor, state legislators, and union leaders should consider this option if they are serious about addressing the commonwealth’s pension crisis.

Read the full piece, including a description of a similar initiative’s fate in Illinois, here.

 

Photo credit: “Flag-map of Pennsylvania” by Niagara – Own work from File:Flag of Pennsylvania.svg and File:USA Pennsylvania location map.svgThis vector image was created with Inkscape. Licensed under CC BY-SA 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Flag-map_of_Pennsylvania.svg#mediaviewer/File:Flag-map_of_Pennsylvania.svg

Nevada Newspaper: State Pension Needs Disability Reform

magnifying glass over twenty dollar bill

The editorial board of the Las Vegas Review-Journal called on lawmakers Tuesday to deal with the “outrageous abuses” it says are plaguing the state’s disability pension system.

From the Review-Journal:

We know the Public Employees Retirement System of Nevada provides retirement benefits to people who aren’t retired. But did you know the taxpayer-funded pension plan also provides disability benefits to former government workers who aren’t disabled?

[…]

The Review-Journal exposed the PERS disability giveaways last year in an investigation of the termination of Las Vegas police officer Jesus Arevalo. On Oct. 15, 2013, Mr. Arevalo became the first Metropolitan Police Department officer to be fired over an improper use of deadly force. In 2011, he killed Stanley Gibson, an unarmed, mentally ill Gulf War veteran who became lost while driving around an apartment complex parking lot. That tragedy, which followed a Review-Journal investigative series on police use of deadly force, led to major changes in department training, policies and oversight — and a $1.5 million settlement for Mr. Gibson’s widow.

Mr. Arevalo was on paid suspension for almost two years while termination proceedings played out. But weeks before his firing was finalized, Mr. Arevalo submitted disability retirement paperwork — for stress related to his firing and the shooting that prompted his firing. The “retirement” was approved by his immediate supervisor, a personal physician, the PERS board and the pension agency’s doctor.

Mr. Arevalo, who was 36 at the time of his firing, will collect about $2,500 per month for the rest of his life, plus cost of living increases. Over 35 years, he could collect more than $1 million.

Anyone who receives federal disability benefits or long-term disability benefits through a private insurer isn’t supposed to work. But Mr. Arevalo’s disability claim applies only to police work. He can collect his PERS disability benefits and work in another field.

Read the entire editorial here.

 

Photo by TaxRebate.org.uk

New Congress Likely to Attempt Federal Pension Reform

capital

The New Congress has already proved it has its eye on retirement benefits.

But even with lawmakers’ eyes locked on Social Security, there may be federal pension changes coming down the pipeline.

Many lawmakers are weighing changes to the federal pension system, and new legislation on that front could surface this year, according to two key committee chairmen.

The two lawmakers leading the push for federal pension reform are:

* Rep. Jason Chaffetz, R-Utah, the new chairman of the House Oversight and Government Reform Committee

* Rep. Mark Meadows R-N.C., chairman of a subcommittee of the Committee on Oversight and Government Reform that focuses on the federal workforce.

More on their plans from the Federal Times:

As the new Congress kicks into gear, lawmakers want to take another crack at reforming the civil service.

Rep. Jason Chaffetz, R-Utah, the new chairman of the House Oversight and Government Reform Committee, said he will look at reforming all aspects of the federal workforce, from hiring and firing authorities to pensions and pay.

“We have jurisdiction on the federal workforce and there is no doubt we are going to bring that up,” Chaffetz. “From soup to nuts: Everything from how we hire them on the back end to how we pay them out in the retirement system.”

[…]

As Congress kicks into gear, Meadows believes the committee will be working on legislation for at least some parts of civil service reform.

“I would be very surprised if there were not a number of legislative initiatives and certainly, as a subcommittee chairman, I am prepared to be very proactive,” Meadows said.

What might the reforms look like? A likely bet is legislation that would shift new federal hires into a 401(k)-type plan, as opposed to the current defined-benefit system.

The reforms might be rolled out slowly at first, and could be focused on a particular government agency to study the effects before implementing the reforms across all agencies.

The outgoing Postmaster General has even suggested that any pension reforms be “tested” out on the Post Office first.

The Postmaster said:

Outgoing Postmaster General Patrick Donahoe has called for an end to the defined-benefit pension system and instead shift to a 401(k)-style retirement policy. He said Postal Service reform could also serve as a precursor to governmentwide civil service reform.

“I would encourage Congress to view the Postal Service as a test bed or laboratory of change that might be applied to the rest of the federal government,” Donahoe said.

He said agencies need to be be able to control costs and plan for the future while getting the flexibility to experiment without rigid workforce rules and he said the Postal Service could be at the forefront of that change.

“In today’s world, does it really make sense to offer the promise of a government pension to a 22-year-old who is just entering the workforce? And how reliable is that promise?” Donahoe asked. “I’d like to see the Congress encourage much more experimentation at the federal level. “

No legislation has yet been proposed.

 

Photo by  Bob Jagendorf via FLickr CC License

Louisiana Approves Probe Into Teacher Pension Debt

magnifying glass and money

Louisiana school board officials on Tuesday signed off on a study that will probe the state’s Teachers Retirement System and the associated costs.

The study will be conducted by Louisiana State University and headed by LSU official Jim Richardson.

More from the Advocate:

The review is supposed to aid a task force of education groups grappling with the issue, including why costs continue to rise.

“It would be irresponsible for us to not have a third party take a look at the situation,” said Chas Roemer, president of the state Board of Elementary and Secondary Education.

Roemer, of Baton Rouge, said similar retirement problems have driven some municipalities into bankruptcy.

Scott Richard, executive director of the Louisiana School Boards Association, said the key problem for the system is a lack of state aid.

At issue is what is called the Unfunded Accrued Liability, which is the money needed to pay promised benefits to both current and retired members.

The nearly $12 billion UAL for teachers is the largest of the state’s four retirement systems.

[…]

The study is supposed to uncover reasons for rising retirement expenses, the ability of local schools boards to handle the costs and the long-term sustainability of the system.

Officials from teacher advocacy groups and unions, as well as some school board officials, opposed the study.

They said the study will only duplicate what other probes have found in the past.

 

Photo by TaxRebate.org.uk

Pennsylvania’s Municipal Pension Debt Rising, Says Top State Auditor

Pennsylvania

Since 2012, the unfunded liabilities of Pennsylvania’s worst-funded municipal pension systems have increased by $1 billion, according to the state’s top auditor.

The increase in liabilities comes despite years of rising stock market values.

The state’s auditor general says he will “continue to beat this drum” until lawmakers come up with a way to make municipal pension systems more sustainable.

From the Associated Press:

A continued failure by state lawmakers to act is allowing a growing problem of municipal pension debt in Pennsylvania to get worse, state Auditor General Eugene DePasquale said Wednesday.

DePasquale renewed the warning he gave a year ago, saying that municipal pension debt in the billions of dollars is putting municipalities and retiree benefits on shaky ground.

DePasquale said that municipal governments with the weakest pension plans were underfunding them by $7.7 billion through 2012, an increase of $1 billion after DePasquale’s office analyzed two years of new data.

That increase took place during a time when the economy was growing and stock market values were rising, DePasquale noted. Historically, the pension plans of police and firefighters have been responsible for most of the debt.

Nearly 70 percent of that $7.7 billion debt, or $5.3 billion, belonged to Philadelphia, according to DePasquale’s office. Pittsburgh was second with $485 million. Among Pennsylvania’s cities, Scranton had the worst funding ratio at 23 percent.

DePasquale warned that, unless changes are made, rising pension debt that forces a municipality into bankruptcy could mean benefit reductions for retirees. Some municipalities will have to raise taxes or lay off police and firefighters, he said.

“Some of them may be forced to do both,” DePasquale said.

The majority of the state’s 1,200 municipal pension plans were funded at 90 percent or higher, according to the Auditor General’s office.

But some plans are so underfunded that they threaten to bankrupt the municipalities with their unfunded liabilities.

 

Photo credit: “Flag-map of Pennsylvania” by Niagara – Own work from File:Flag of Pennsylvania.svg and File:USA Pennsylvania location map.svgThis vector image was created with Inkscape. Licensed under CC BY-SA 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Flag-map_of_Pennsylvania.svg#mediaviewer/File:Flag-map_of_Pennsylvania.svg

Chart: Public Workers More Confident in Pensions, 401(k)s Than Social Security, Medicare

retirement confidence graph

A recent survey found that, among all streams of retirement income and benefits, public employees were most confident in their pension and 401(k) benefits; both in terms of being there for them when they retire and being sufficient enough to get them through retirement.

People were least confident in Social Security and Medicare. Only a small portion of people were “very confident” they had enough savings to get them through retirement.

Chart credit: Retirement Confidence Survey 2014