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Top New Hampshire Lawmaker Forms Pension Reform Study Committee

New Hampshire House Speaker Shawn Jasper is forming a 14-person panel to study the state’s retirement system and potential reforms.

The committee was announced Wednesday. More from the Associated Press:

House Speaker Shawn Jasper is making pension reform a priority of the new legislative session by creating a 14-member committee to study the system that provides retirement benefits for public employees.

New Hampshire’s public pension system faces a $4.5 billion unfunded liability and Republicans want to reform the system. Jasper announced the committee Wednesday and appointed Rep. David Hess, a Hooksett Republican, as chairman.

The committee is made up of nine Republicans and five Democrats. The committee is tasked with studying how the program is funded, eligibility and ways to modify the system.

The state Supreme Court recently upheld changes made several years ago that increase the contribution rates for state employees.

The public pension system covers about 50,000 active and 30,000 retired workers.

The New Hampshire Retirement System was 66 percent funded at the end of fiscal year 2013-14. The system manages $7.41 billion in assets.

Photo credit: “Flag map of New Hampshire” by LGBT_flag_map_of_New_Hampshire.svg. This file was derived from:LGBT_flag_map_of_New_Hampshire.svgFlag_of_New_Hampshire.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Video: Solving Teacher Pension Underfunding

Here’s a long discussion on the state of teacher pension systems and how public policy can address the systems’ liability issues while causing the least amount of harm to teachers, retirees and students.

From the video description:

America’s teacher-pension systems (with up to a trillion dollars in unfunded liabilities according to some estimates) present a raging public-policy dilemma. Career teachers absolutely deserve a secure retirement, but lawmakers promised them benefits that the system cannot afford, as those promises were based on short-term political considerations and bad math. Now the bill is coming due, and someone’s going to get soaked.
What’s the least bad option going forward? Who should bear the brunt of this legacy of fiscal irresponsibility? Current retirees? Today’s teachers? New teachers? School districts? Taxpayers? The students themselves?

Examining an Insider’s View of Canada’s Pension Debate

Last month, the Toronto Star interviewed Tom Reid of Sun Life to get an insider’s view of Canada’s pension debate. The interview can be read here.

This week, Leo Kolivakis of the Pension Pulse blog penned his own critical examination of the debate. The post can be read below.

____________________________________

By Leo Kolivakis, Pension Pulse

Indeed, the Canadian Life and Health Insurance Association is hopping mad and expressed its disappointment on its website.

The problem is that the CLHIA is spreading misinformation and outright lies on the so-called benefits of defined-contribution (DC) plans. They are nowhere near as safe and secure as defined-benefit (DB) plans and they’re a lot more costly, regardless of what Reid claims. They also don’t perform as well over long investment horizons because they don’t invest in private investments.

Go back to carefully read my comment on the brutal truth on DC plans, it’s a real eye-opener. We have become so ill-informed on this debate that we accept the lies and misinformation being spread out there.

As I’ve long argued on this blog, there is a case for boosting DB plans in Canada and elsewhere. The benefits of DB plans are well-known and under-appreciated.

Importantly, boosting DB plans, especially now that Canada’s crisis is just beginning (if you wait for “better economic conditions” you will never enhance the CPP!), makes for good retirement and economic policy. Why? Because if you do it properly, adopting world class governance standards, you will enhance economic activity, increase the revenue from sales taxes and reduce the overall debt of the country.

Of course, the insurance and banking industry don’t agree and will keep pushing the Conservatives to peddle PRPPs as the solution but they’re wrong and they know it. They’re petrified of Canada’s top ten and for good reason, when you look at the evidence, our large DB plans are doing an outstanding job providing their members with safe and secure retirement benefits. No DC plan can compete with our large DB plans.

Are Canada’s top ten perfect? Of course not. If they were, this blog would never exist. But take it from this insider, given a choice between anything Prudential, Sun Life, Manulife or Canada’s big banks have to offer and having your retirement money managed by our large DB plans, you should always opt for the latter. Period.

Does this mean that banks and insurance companies should get out of the retirement business altogether and just leave it up to our large DB plans? No, I believe there is a market for what they’re doing and they can certainly compete with the internal portfolio managers at our large DB plans but they’re going to have to lower their fees and change their angle.

In fact, if banks and insurance companies in Canada were smart (they’re hopelessly myopic!) and realized the bigger picture, they would be forcing the federal government to enhance the CPP for all Canadians and boost our DB plans.

I leave you with a comment Bruce Rogers wrote to the Toronto Star in regards to the interview above:

Thanks for devoting space to Ontario’s plans for a pension to supplement the Canada Pension Plan. Too bad your effort gave the platform to an interviewee who has a financial interest in the inadequate, defined contribution approach to the problem.

Our society clearly needs to take action to ensure that retirees and seniors generally enjoy financial security and a modicum of dignity. To argue against a more generous defined benefit approach is to ignore a serious problem.

Of course, the Harper government has made its decision and Bay Street will agree with that course. Let’s hope the business pages of the Star will balance the debate in future, perhaps by exposing the growing threat to defined benefit pensions where they exist.

This is an informed reader who understands what’s at stake. When it comes to retirement policy, we need to go Dutch on pensions and not take lessons from Down Under or worse, the United States of pension poverty.

Lastly, I wish the media in Canada would start interviewing real pension experts like Jim Leech, Leo de Bever, John Crocker and others who truly understand what is at stake and why we need to boost defined-benefit plans for all Canadians.

Photo credit: “Canada blank map” by Lokal_Profil image cut to remove USA by Paul Robinson – Vector map BlankMap-USA-states-Canada-provinces.svg.Modified by Lokal_Profil. Licensed under CC BY-SA 2.5 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Canada_blank_map.svg#mediaviewer/File:Canada_blank_map.svg

Maryland Gov.-Elect Pulls Plug on Retirement Savings Panel

Maryland Gov.-elect Larry Hogan says he is pulling the plug on a retirement savings task force set up under his predecessor, Gov. O’Malley.

The panel’s purpose was to study and issue findings on how to get middle-class residents to save more for retirement.

Politics may have played a role in Hogan’s decision to shut the panel down.

In Congress, Leadership Shifts Could Lead to Retirement Plan Changes

Republicans control both houses of Congress, and there are many leadership shifts underway at the committee level as well. These shifts open the door for changes to retirement plans coming from the federal level.

One idea sure to be brought up is Senator Orrin Hatch’s SAFE Retirement Act. From Pensions and Investments:

At the committee level, the change of leadership raises the prospects for serious consideration of new retirement ideas, like incoming Senate Finance Committee Chairman Orrin Hatch’s SAFE Retirement Act proposal, which would expand the use of multiple employer plans, allow public defined benefit pension funds to purchase private annuities, and create a “starter 401(k) plan” for small, private-sector employers.

Lawmakers could also take a closer look at defined-contribution plans and cash balance plans. From P&I:

As the tax reform debate heats up, “Republicans are going to want to cut expenses and raise revenue,” said Michael Webb, vice president of Cammack Retirement Group, Wellesley, Mass., a consulting firm specializing in defined contribution plans. “How do you do that? By changing things like deductibility on retirement plan contributions.”

Along with those discussions, “there might be opportunities in 2015 for retirement plan proposals that would enhance coverage and benefits,” said Kent Mason, an attorney at law firm Davis & Harman LLP, Washington, who is outside counsel for the American Benefits Council, Washington. He and others note that multiple employer plans enjoy bipartisan support in Congress, which could convince regulators to make them easier to create.

Both Republicans and Democrats would like to see more automatic enrollment and escalation in defined contribution plans. “This is showing up in bipartisan bills because (current default rates) are not high enough” for retirement security,” said Mr. Mason. “This is an area where I could see common ground.”

Hybrid retirement ideas like cash balance plans will come up early, starting with a Jan. 9 hearing on IRS regulations finalized in September for plan years after 2015. “I do think there is pent up demand for some type of DB (proposal),” said Alan Glickstein, Dallas-based senior retirement consultant at Towers Watson & Co. Hybrid pension plans for the military will also come up early in the year, when recommendations from the Military Compensation and Retirement Modernization Commission are due, sources said.

Read the full article here.

Virginia Senator Introduces Bill That Would Curb Pensions of Lawmakers Who Leave For Other State Jobs

In Virginia, long-time lawmakers can boost their pensions dramatically by stepping down from the House or Senate in favor of another state job.

A state senator has drafted a bill that would limit the pension boost received by lawmakers who use this tactic.

Details of the bill from the Roanoke Times:

Quitting the Virginia House or Senate for a state job can sharply boost a legislator’s retirement benefits, and state Sen. David Marsden would like to change that.

Marsden, D-Fairfax, has introduced a bill meant to make trading elective office for state employment less of a financial windfall. Legislators who step down in the middle of their terms to take state jobs would still see their pension benefits grow, but more slowly than they do now.

“I think it rubs people the wrong way that somebody gets appointed for political purposes and then hits this bonanza,” he said. “Your retirement should be rewarded, but not with such an amazing windfall.”

State senators and delegates earn about $18,000 a year in positions that are considered part-time, but which count as full time in the state retirement system. Legislators who serve 30 or more years are eligible for the state’s full pension benefit, which is about half their annual salary — about $9,000 a year.

That figure balloons if the legislator takes a high-paying state job, since pension benefits are based on an average of the employee’s last three years of service, or five years for employees who began after this past Jan. 1. A long-serving legislator who puts in three years in a $100,000-a-year job would then receive an annual pension of about $50,000 a year.

Under Marsden’s bill, the pension benefit would be based on an average of 10 years’ salary for anyone who sees a dramatic spike in salary — exceeding 400 percent — in the last four years of service.

The bill hasn’t come out of nowhere. The FBI is currently investigating a Virginia lawmaker who did exactly what the bill aims to prevent: quit his post mid-term in favor of a high-paying state job. From the Roanoke Times:

Marsden proposed the legislation at a time when the FBI is investigating a state senator who quit in June amid job talks, and as state lawmakers prepare to tighten the state’s ethics laws in response to the conviction in September of former Gov. Robert McDonnell and his wife, Maureen, on federal corruption charges.

Phillip Puckett, D-Russell County, abruptly resigned the evenly divided state Senate in June with plans to take a high-paying job with the Republican-controlled state tobacco commission. His exit handed control of the chamber to the GOP in the middle of a standoff over Medicaid expansion. Democrats cried foul, and the FBI launched an investigation. Puckett said there was no quid pro quo and, amid the uproar, withdrew his name from consideration for the tobacco commission post.

In 1997, then-Gov. James Gilmore III, a Republican, named a Democratic state senator from Loudoun County, Charles Waddell, his deputy transportation secretary, a move that gave the GOP control of the Senate. Gilmore also appointed a Democrat to head the Department of Conservation and Recreation, creating an opening for a Republican to win a seat in the House.

Virginia Gov. Terry McAuliffe hasn’t taken a position on the bill.

Photo by Anderskev – Own work. Licensed under Creative Commons Attribution 3.0 via Wikimedia Commons

Judge: Illinois Pension Reform Law Is Unconstitutional

A Circuit Court judge ruled Friday afternoon that Illinois’ sweeping pension reform law is unconstitutional.

Judge John Belz said in his ruling that the Illinois constitutional makes a promise to protect employee pension benefits.

The ruling will be appealed and will soon head to the state Supreme Court.

From Crain’s Chicago Business:

Sangamon County Circuit Court Judge John Belz ruled today that the state’s pension reform law is unconstitutional, setting up an immediate appeal to the state’s highest court.

“The State of Illinois made a constitutionally protected promise to its employees concerning their pension benefits,” Belz said in his seven-page ruling. “Under established and uncontroverted Illinois law, the State of Illinois cannot break this promise.”

While the state lost this round, the constitutional question ultimately has to be resolved by the Illinois Supreme Court. The longer the case takes to get there, the longer state finances remain in limbo and the longer any “Plan B” for pension reform goes undiscussed.

“Seven people will decide this at the end of the day,” said Illinois Sen. Daniel Biss, D-Skokie, one of the principal co-authors of the pension reform law. “It’s a victory for the state to get it to the Supreme Court faster. The state suffers from uncertainty. Ultimately what matters most is how we resolve this problem eventually.”

The decision was widely expected, given the state Supreme Court’s ruling in Kanerva vs. Weems, a similar case in July testing whether retiree health care benefits can be reduced. The justices ruled that the state constitution’s pension protection clause is “aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.”

Proponents of the reform law called today’s ruling “significant”, but not a be-all-end-all judgment by any means. That’s because the Illinois Supreme Court, who will hear arguments on the law at some point in the coming months, will have the final say.

The state has 30 days to appeal the ruling up to the Supreme Court.

Watchdog Report: Bruce Rauner Adviser Is Triple-Dipping “Prince of Pensions”

Bruce Rauner won the Illinois governorship, in part, by campaigning as a reformer and a political outsider who would “shake up Springfield.”

Rauner targeted the state’s underfunded pension systems as a prime candidate for reform in at least one campaign ad, when he noted that Illinois carries “$8,000 of pension debt for every man, woman and child.”

The governor-elect recently appointed Glenn Poshard to his transition team, which spurred an investigation by the Better Government Association and CBS 2 News.

The investigation found that Poshard “triple dips” – or, pulls in pensions from three separate retirement systems, netting him nearly $200,000 annually in pension benefits. Poshard is breaking no laws, but the situation demonstrates the “loopholes” in the Illinois pension system that can sometimes lead to ballooned benefits.

Andy Shaw, CEO of the Better Government Association, told CBS: “Governor-elect Rauner could probably learn a lot about how to reform the pension system by looking at the ways in which Glenn Poshard used loopholes to enrich his own pension.”

More from the Better Government Association:

Poshard collects $189,979 a year in state pensions from three separate public-sector retirement systems, more than the $177,412 salary currently paid to Gov. Pat Quinn, the BGA found. Among former governors, only Jim Edgar gets more in retirement: $205,425, having recently picked up a second pension from his days teaching at the University of Illinois. Former Gov. Jim Thompson gets $143,181 in state pension benefits, records show.

In addition to his state-government pensions, Poshard collects a $15,000-a-year federal pension for his 10 years in the U.S. Congress representing a southeastern Illinois district, bringing his total retirement package to slightly more than $200,000 annually, according to records and interviews.

To date, he’s collected more than $1.4 million in state pension benefits, and if he lives until he’s 80, that $200,000 he’s now getting could increase to an estimated $280,000 a year.

[…]

The cornerstone of Poshard’s generous state pension is the five years he served as a state senator. Of all state pension systems, the General Assembly Retirement System, or GARS, has the most deluxe features, designed and passed by members of the General Assembly.

Chief among those features is a formula that allowed him to collect a pension starting at 85 percent of his final state-government salaries – which averaged $165,000 as an SIU administrator during his first of two stints at the state government-run college.

Poshard also was allowed to increase his years of state service and thus boost his state pensions by counting unused sick time, un-served state Senate time, and credits purchased for past jobs in the military and while working his way through college, the BGA found. Overall, Poshard’s state pensions are based on 30 years of service and credit.

Poshard commented on his pension benefits to CBS:

“I am very appreciative for the retirement benefits I now receive which were determined by the laws in place at both the state and federal levels. If some of those laws need to be changed in order to more fully fund the pension system, as I myself have advocated before the legislature, then I am more than happy to see a reduction in my own retirement benefits.”

He also gave a phone interview to the Better Government Association:

In a telephone interview, Poshard said he has done nothing unethical and “never tried to game the system.”

“I can tell you, I worked hard my whole life,” said Poshard, 69. “I never shortchanged the state.”

[…]

“I’m grateful for what I got. I’m happy with it. I can’t pass judgment on whether the overall pension was too generous,” said Poshard.

A spokesman for Bruce Rauner said the Poshard’s role on the transition team will not be focused on pension issues.

The entire BGA investigation can be read here.

The corresponding CBS investigation can be read here.

Atlanta Wins Case Over Employee Pension Contributions

A key portion of Atlanta’s 2011 pension reforms have been upheld in court, the city said Tuesday.

In 2011, the city increased employee contributions to the pension system by 5 percent – a move which workers said violated their contracts. But a judge has sided with Atlanta on the matter.

From Governing:

A Fulton County Superior Court judge has upheld Mayor Kasim Reed’s historic 2011 pension reform, siding with the city in a class-action lawsuit brought by employee unions, the mayor’s office announced Tuesday.

A handful of union workers representing Atlanta fire, police and city employees sued the city last November, claiming the pension reform that forced employees to pay 5 percent more toward their retirement benefits was in violation of their contract and, therefore, unconstitutional. Such an increase, the employees argue, must also increase their pension benefits.

But Reed and city officials argued — and Judge John Goger agreed in his ruling — that the change is allowed under Georgia law. The mayor, who championed the reform in his first term, has long said overhauling the employee retirement benefits program was critical to the city’s financial stability, and will help Atlanta pay off a $1.5 billion unfunded pension liability.

Without increasing contributions, the city can’t afford to pay the full benefits eventually owed to workers, city leaders argue.

Reed and City Attorney Cathy Hampton are expected to hold a press conference on the issue Wednesday.

Atlanta City Hall, as well as Fulton Superior Court, was closed on Tuesday in observance of Veterans Day.

An attorney for the public safety unions said he hasn’t had time to review Goger’s decision. Lee Brigham said it is premature to comment on the case and whether his clients are likely to appeal.

Read more about Atlanta’s pension changes here.

Photo Credit: “Atlanta skyline” by AreJay at en.wikipedia – Licensed under Creative Commons Attribution 2.0 via Wikimedia Commons

Chart: Retirement Benefits Are Most Important Job Feature For Majority of Public Sector Workers

Public sector workers were asked what characteristics or features of their jobs are most important to them. Job security, salary and health insurance were all extremely important; but for teachers and public safety workers, retirement benefits trumped everything.

Even among the public workforce at large, retirement benefits were rated as “extremely important” by over 60 percent of respondents.

Chart credit: 2014 Retirement Confidence Survey

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