Welcome to September’s final edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement.
Before you dive into our top stories from this week, check out some stories of public employees helping their communities during the coronavirus pandemic.
Here are the top stories from this week:
Don’t look to retired teachers for savings by Jefferey Hart. In this letter to the editor published in The Day in New London, Connecticut, Hart responds to the newspaper’s Editorial Board, which wrote an editorial earlier this month advocating for cuts to pension benefits for retired public employees in the Teachers’ Retirement System (TRS). Hart accurately points out that the state’s teachers contribute 7% of their paychecks to the system, and that Connecticut is one of 15 states where public educators do not participate in Social Security. Hart writes that, for these public employees, “their TRS pensions are their primary, often their only, source of retirement income.” Connecticut lawmakers would be wise to heed Hart’s words and protect the pensions these educators have earned during a long career of service to the state.
Analysis: Louisiana’s debt burden at $21.6 billion before COVID shutdowns, $17,100 per taxpayer by Bethany Blankley. In this article for the Center Square (an outlet that frequently takes aim at public pensions), Blankley cites a new report from the pension critical organization Truth in Accounting that misleadingly suggests Louisiana’s public pensions are a burden for the state’s taxpayers. This purposeful manipulation of data is to spread misinformation and fails to note how pensions benefit taxpayers in Louisiana. First, unlike any other portion of a state’s budget, pensions are actually prefunded. Second, according to the National Institute on Retirement Security (NIRS), expenditures from state and local pensions supported $1 billion in federal, state, and local tax revenue in Louisiana in 2016. This article covering Truth in Accounting’s report should be taken with a grain of salt considering the organization’s connections with groups that attack public workers’ retirement security.
Pandemic’s Toll on Public Pension Plans by Lou Cannon. In this article for Real Clear Politics, Cannon cites the coronavirus-induced economic crisis to falsely argue that it is negatively impacting public pensions and that sponsors should institute stress testing because of it. Cannon’s argument is incorrect because the vast majority of public pensions are well-funded and will be able to withstand the current economic downturn. In the very few states like Illinois that Cannon cites, lawmakers repeatedly skipped or deferred payments to their pension systems, which caused their unfunded liabilities to increase over time. If these state legislatures had practiced fiscal discipline and made their required contributions to these systems (just as public employees do with each and every paycheck), these select states would be in better fiscal shape. Furthermore, most plan sponsors already practice stress testing when they determine the actuarially required contribution (ARC) that the plan requires from employers and employees. These annual reports examine the expected investment earnings over the course of an employee’s career (say, 20-30 years), which gives sponsors an accurate and unbiased rate of return since these results have less variability over time. When outside groups push for stress testing, however, they tend to only emphasize blips in the market in their analysis, which creates biased results for plan sponsors and can make the ARC look larger than it should be to account for these supposed blips.
Pandemic hurting retirement security; older women face unique challenges, GAO comptroller tells Senate committee by Kimberly Bonvissuto. Yesterday, the Comptroller General of the U.S. Government Accountability Office (GAO) testified before the U.S. Senate Special Committee on Aging about a survey titled, Retirement Security: Older Women Report Facing a Financially Uncertain Future. According to this summary that Bonvissuto wrote for McKnight’s Senior Living, the survey interviewed 190 women (most of whom were at least 70 years old or older) in 14 different focus groups on how they felt about their finances in retirement. It also cites data from the Federal Reserve in 2016 which shows “that less than half of households with women aged 70 or older had a high level of confidence in their retirement security,” McKnight writes. This is due to a variety of reasons, including concerns among the female retirees about the increasing costs of healthcare and housing. Policymakers should prioritize protecting pensions, especially for female public employees, as they have been proven to help bolster their security in retirement.
Be sure to check back next week for the latest news in the fight for a secure retirement!