Welcome to the latest edition of This Week in Pensions! As we do most weeks, we have gathered the best stories about pensions and retirement security from the previous week. This is the news you need to know in the fight for a secure retirement.
Here are this week’s top stories:
Guest columnist: Bevin, Kentucky Republicans fail state employees, again by Bridget Early. In an opinion piece published by The State Journal, NPPC’s Executive Director Bridget Early argues that Governor Matt Bevin and Kentucky lawmakers harmed state employees with the passage of HB1. In her piece, Early states, “HB1 seeks to reward quasi-governmental agencies that decide to leave KRS by offering those agencies that sever from KRS a rate freeze, while those that remain in the system continue to face budgetary pressure. These quasi agencies are forced to choose between their operating budgets and providing retirement security to their employees.” By pushing quasi-agencies into a financial predicament, lawmakers are also hurting the funding status of the Kentucky Retirement System. Early continues, “With HB1 driving agencies to 401(k) plans, fewer people contribute to KRS and the system’s unfunded liability will increase.”
Moody’s report: Kentucky’s new pension law ‘credit negative’ for state by Joe Sonka. Confirming NPPC and the Kentucky Public Pension Coalition’s cautions about the dangers of HB1, Moody’s issued a warning to Kentucky lawmakers. Sonka writes, “Moody’s Investors Service has issued a report calling the new pension legislation passed by the Kentucky General Assembly two weeks ago ‘credit negative’ for the state, as it pushes public pension costs into the future and increases the chances that the state will be responsible for a larger share of its worst-funded pension plan.”
SC pension system by Bridget Early. In a letter to the editor to South Carolina’s Post and Courier, NPPC’s Executive Director Bridget Early counters a piece by the publication’s editorial staff about pension reform in 2020. Early argues, “South Carolina’s state pension system is in good shape, and over the last couple of years, lawmakers have been making full payments into the system. If lawmakers decided to close the state pension system to new hires, as the editorial suggests, they would be making the same fateful mistake that other states and municipalities have made in the past.” Early uses the examples from Michigan, West Virginia, and Alaska – states that have closed their pension plans to newly hired public employees and faced the consequences.
NIRS: No Money saved for 4 states that shifted to DC from DB plans by Rob Kozlowski. This week, the National Institute on Retirement Security (NIRS) released a series of reports entitled, Enduring Challenges: Examining the Experiences of States that Closed Pension Plans. The reports cover four states that closed their pension plans to newly hired public employees and moved them to alternative retirement plans such as 401(k)s or cash balance plans. The states include, Alaska, Michigan, West Virginia, and Kentucky. Dan Doonan, Executive Director of NIRS stated, “The data made it clear that closing a pension plan to new employees increases taxpayer costs and doesn’t close any funding shortfalls. What’s important to understand is that switching away from pensions starves the plan of employee contributions while the liabilities remain. This can reduce the economic efficiencies of a pension system as the number of retirees grows compared to the number of employees paying in.”
Be sure to check back next week for the latest news in the fight for a secure retirement!