Welcome to this edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement.
Here are our top stories:
OPINION: Alaska shouldn’t change its retirement system by Lyda Green. In her op-ed for Anchorage Daily News, former Alaska legislator, and president of the Alaska Senate Lyda Green rails against House Bill 55 (HB55), which would reopen the Public Employees’ Retirement System of Alaska for public safety employees. Since Alaska closed its defined-benefit system to new employees in 2005, the state has experienced a steady decline in public safety personnel, teachers, and other public workers. Among her arguments, Green suggests, “The retention challenges facing the state in this regard are nearly identical to challenges reported by public safety leaders in almost every other state in the country, all of which have continuously offered some type of traditional pension benefit as a benefit. There is no data to support the expectation that offering a pension benefit will have any impact whatsoever on retention.” However, a report released by the National Institute on Retirement Security (NIRS) found that closing pension plans did not reduce the unfunded liability, but it created a challenge to manage the existing unfunded liability without the contributions of new employees. NIRS also noted in a report to the state legislature that the Alaska Department of Public Safety named the lack of a defined-benefit pension as one of the primary obstacles to recruiting and retaining new state troopers. Between 2011 and 2017, the Alaska DPS found that 72% of non-retirement separations went to work for public safety departments in states that offer a pension. Alaska is also considering HB 220, which would reopen the pension system to teachers and state public employees to address the recruitment and retention problems plaguing those workforces.
‘Here we go again’: Florida lawmakers try again to cut new state workers off from pension plan by James Call. The Florida Legislature is attempting to further erode retirement for public employees again with SB 84, a bill that would eliminate participation in the Florida Retirement System’s (FRS) defined-benefit plan for new hires after June 30, 2022. Senate President Wilton Simpson cited the growth of FRS’s unfunded liability from $15.8 billion in 2008 to $36 billion in 2022 as the main reason for closing the program, claiming that transitioning new hires into a defined-contribution plan would save the state money in the long run. We have noted, repeatedly, that switching from a defined-benefit to a defined-contribution plan only costs taxpayers more money while driving talented employees out of service. Some lawmakers in Florida are opposed to this change, noting that public pension reform has failed in the state in the past and harms public workers. Former State Senator Jeremy Ring said, “The only number that matters is 80% … That’s the gold standard… Go anywhere in the world, find one pension expert, one financial expert, and bring them to our committee to tell us our pension fund is one bit challenged.”
Public Pension Plans’ Long-Term Fiscal Health Varies Widely Across States, PEW. State pension funds across the country continue to stabilize as lawmakers practice funding discipline coupled with 2021’s strong stock market performance, with a national funding ratio of over 80%, the highest since the Great Recession. This week the Pew Charitable Trusts released individual state fact sheets detailing “comprehensive views” of state pension funds’ financial health. Pew claims to be a non-partisan, evidence-based source of information, yet they have a history of bias when it comes to public pensions. The fact sheets cover a range of topics, including stress testing. As we have covered in the past, legislating stress testing is not necessary when pension systems already provide these scenarios annually.
Be sure to check back in next Friday for the latest news in the fight for a secure retirement!