Friday, August 26, 2016

Louisiana in Top Five of State Pension Plans

This excerpt is taken from The Week in Public Finance in Governing magazine.

By Liz Farmer, August 26, 2016

Most Pensions Falling Behind

A new analysis of state public pension plans this week shows that only one in three states are actually on a path to reduce their unfunded liabilities.

The report, by the Pew Charitable Trusts, used a new metric called net amortization, which essentially measures whether a pension plan's accounting assumptions and payment schedule are holding up over time. Only 15 states are achieving positive amortization, according to Pew. In other words, they're following contribution policies that are sufficient to pay down pension debt. The remaining 35 states are facing negative amortization, or are following contribution policies that allow the funding gap to continue to grow.

Based on the measure, the plans in the worst shape are, in order: Kentucky, New Jersey, Illinois, Pennsylvania and California. The report does note that Pennsylvania has committed to large contribution increases and is projected to reach positive amortization by 2018. The top five plans in the best shape are West Virginia, New York, Indiana, South Dakota and Louisiana.

The Takeaway: This metric gets at the true health of a pension plan better than the annual funding status because it tells us in which direction a pension plan is going. Net amortization supplies the long view, which seems appropriate when talking about a program that's supposed to last for generations.

Case in point: 40 states reported decreased unfunded liabilities in 2014 thanks to stronger-than-expected investment returns. This is great news for the short term, but, according to the report, only a small number met the positive amortization benchmark. "Investment returns vary widely over time," the report said, "and most governments that sponsor pension plans made contributions that were not large enough to reduce debt based on expected long-term rates of return."

The measure helps explain why some plans -- such as Houston's or the state of Alabama's -- haven't made up ground even though governments have paid their full pension bills.

Thursday, July 14, 2016

Details of Social Security Offset Legislation Postponed

The federal House Ways & Means Committee met Wednesday, July 13, but consideration of H.R. 711, the "Equal Treatment of Public Servants Act of 2015" was postponed. The proposed legislation would repeal the current Social Security Windfall Elimination Provision (WEP) and put in a proportional formula that calculates benefits using a public servant's actual earnings.

Rep. Kevin Brady (R-TX) commented that over the past several days, it was evident that public servants were not in agreement over the legislation. Both he and Rep. Richard Neal (D-MA) remarked that the community needed to come together and that a bipartisan solution was necessary to move forward.

The WEP affects those LASERS retirees who have also worked in the private sector by reducing or eliminating their Social Security benefits. Keep in mind that your LASERS pension is NOT diminished by WEP, only Social Security benefits if applicable.

LASERS will continue to distribute information regarding the WEP and relevant legislation, but our knowledge of this federal law is limited. If you have specific questions on how you may be impacted by WEP, please contact the Social Security Administration for assistance. You may also contact RSEA, your advocates in the Louisiana Legislature and National Congress on issues relating to retirement and healthcare.
WEP Resources:

Wednesday, July 13, 2016

Making Social Security Fair for All

Original article here.

By Reps. Kevin Brady (R-Texas) and Richard Neal (D-Mass.)

July 12, 2016

Social Security is an important program that has been serving our seniors and individuals with disabilities for decades. Unfortunately, the program is not without its flaws. Today many Americans — specifically teachers, firefighters, police officers and other public servants who have paid into public pensions and Social Security — are not being treated fairly when it comes to Social Security. 

It’s because of a well-intended but arbitrary policy known as the Windfall Elimination Provision, or WEP. Congress established the WEP in the last major overhaul of Social Security to ensure hardworking Americans who have paid into Social Security throughout their careers receive the benefits they deserve.

However, the provision’s one-size-fits-all approach to calculating benefits has unintended consequences for Americans who have worked public sector and private sector jobs. The WEP arbitrarily reduces benefits by using a special formula for public servants who spent years working in Social Security-covered jobs and non-covered jobs.

Our firefighters, teachers and police officers deserve better. That’s why we’re working together on the Equal Treatment of Public Servants Act of 2015, legislation to repeal the WEP and replace it with a formula that calculates Social Security benefits for our firefighters, police officers, teachers and other public servants just like all other workers. The bill does exactly what the name suggests: treats all workers fairly. 

We propose looking at all lifetime earnings and using a proportional formula to calculate Social Security benefits. In other words, two workers with the same lifetime earnings — one who has spent an entire career in Social Security-covered employment and another who has worked in both covered and non-covered work — will receive a Social Security benefit that is calculated the same way. Instead of arbitrarily reducing benefits, if a public servant only spent half of her career paying into Social Security, she will receive 50 percent of her Social Security benefit — just like someone who spent an entire career paying into Social Security receives 100 percent of his benefit. 

By replacing the WEP, it will also become easier for Americans to plan for retirement. Workers receive a Social Security statement to help plan for retirement, but right now, when a teacher, firefighter or police officer receives his Social Security statement, it’s wrong. It tells him what his benefit would be before the WEP is applied. Our bill will help ensure Social Security statements are accurate for public servants.

It’s not enough to fix the WEP for future retirees; we have to help public servants who are already affected. Our legislation will provide relief for current Social Security beneficiaries subjected to the WEP by providing a restoration of benefits payment each year. 

It’s been 12 years since the first version of the Equal Treatment of Public Servants Act was introduced, but our public servants have been calling on Congress to fix the WEP since it was put into place more than three decades ago. That means, for more than 30 years, our public servants have sat waiting to receive the benefits they deserve and that we know Washington can deliver. That’s far too long.

This commonsense solution has been embraced by our colleagues on both sides of the aisle — including President Obama, who included the proportional approach in his fiscal 2017 budget. The bipartisan Social Security Advisory Board called for the proportional approach, and the Bipartisan Policy Center included it in its recent Retirement Security Commission recommendations. Our legislation enjoys broad support, from the Texas Retired Teachers Association, Association of Texas Professional Educators, Mass Retirees and AARP. 

We can’t ignore the problem any longer. As one of our witnesses so eloquently said at one of our hearings on this bill, “justice delayed is justice denied.” Let’s fix the WEP in order to better serve our teachers, firefighters and police officers. Now is the time to ensure these men and women who dedicated their lives to us receive the retirement benefits they deserve.

Brady has served Texas’s 8th District since 1997 and is chairman of the House Ways and Means Committee. Neal has served the state of Massachusetts in the House since 1989 and is a member of the House Ways and Means Committee.