Wednesday, December 17, 2014

CR-Omnibus Bill Does Not Apply to LASERS

The recent passage in Congress of H.R. 83, the Consolidated and Further Continuing Appropriations Act of 2015 (also known as the CR-Omnibus bill) has been in the news. Reports of this federal law often mention a provision which allows some pension systems to pay benefits at a level lower than originally intended. These provisions do not apply to LASERS or other public sector pension plans. Your LASERS retirement benefit is guaranteed by the Louisiana constitution and is unaffected by this law.

For more information about H.R. 83, visit the U.S. House of Representatives Committee on Appropriations website.

Thursday, December 4, 2014

Moody's Report on State Pensions Finds Improvement

More than half of the 50 US states experienced marginal declines in their fiscal 2013 Moody's adjusted net pension liability (ANPL), a measure that adjusts reported liabilities by discounting at a bond market interest rate and making estimated allocations of multiple-employer cost-sharing plans. ANPLs improved for states that conducted 2013 pension valuations due to favorable investment returns for the year.

The Moody's report contains an analysis of changes in state pension liability levels, and charts and tables ranking states based on various factors. 

Monday, December 1, 2014

LASERS Awarded for 11th Straight Year

From The Advocate: 

The Louisiana State Employees Retirement System received the 2014 Public Pension Standard Award for the 11th consecutive year. The award for plan funding and administration excellence is presented by the Public Pension Coordinating Council.

LASERS Executive Director Cindy Rougeou said the award is “another example of how LASERS benefits Louisiana.”

LASERS administers a defined benefit pension plan that covers approximately 150,000 members. It pays more than $1 billion in annual benefits to retirees and their beneficiaries.

Tuesday, November 25, 2014

NCPERS 2014 Survey: Public Pension Plans Report Solid Returns, Financial Strength, Increasing Confidence

WASHINGTON-- Confidence continues to rise among public pension plan administrators about the sustainability of their funds and their readiness to address future retirement issues, according to a new survey by the National Conference on Public Employee Retirement Systems (NCPERS).

The 2014 NCPERS Public Retirement Systems Study also shows continuing financial strength for public funds, with healthy long-term investment returns.

“Once again, our annual survey provides convincing evidence that the vast majority of public pension plans are financially sound, well-funded and sustainable for the long term,” said NCPERS Executive Director and Counsel Hank Kim, Esq. “It also demonstrates that defined benefit public pension plans are the least costly way to ensure retirement security for American workers.”

Partnering with Cobalt Community Research, NCPERS surveyed 187 state, local and provincial government pension funds with more than 11.8 million active and retired members and with assets exceeding $1.8 trillion. The majority – 81 percent – were local pension funds, while 19 percent were state pension funds. Of the responding funds, 61 percent are members of NCPERS. The data, collected in September and October 2014, represents the most up-to-date information available.

The major findings of the 2014 NCPERS Public Retirement System Study include:

  • Confidence continues to grow about readiness to address future retirement trends and issues. Respondents’ overall confidence rating measured 7.9 on a 10-point scale, up from 7.8 in 2013 and 7.4 in 2011.
  • Funds experienced an increase in average funded level – 71.5 percent, up from 70.5 percent in 2013. Two factors contributed to the change: average one-year investment returns of 15 percent and lower amortization periods.
  • Funds continue to experience healthy investment returns: 14.5 percent for one-year investments (compared to 8.8 percent in 2013); 10.3 percent for three-year investments (up from 10.0 percent last year); 9.8 percent for five-year investments (up from 2.7 percent last year); 7.8 percent for 10-year investments (up from 7.0 percent), and 8.1 percent for 20-year investments (virtually unchanged from last year’s 8.2 percent). Funds continue to work toward offsetting sharp losses from the Great Recession in 2008 and 2009 by strengthening investment discipline. Signs point to long-term improvement in public retirement systems’ funded status.
  • Public funds continue to be the most cost effective mechanism for retirement saving. The total average cost of administering funds and paying investment managers was 61 basis points. According to the Investment Company Institute’s 2014 Investment Company Fact Book, the expenses of most equity funds average 74 basis points and hybrid funds average 80 basis points.

“Because they have lower expenses, public retirement funds provide a higher level of benefits to members,” Kim said. “They also produce a higher positive economic impact for the communities those members live in than mutual funds and defined contribution plans like 401(k)s.”

  • Funds continue to tighten benefits, assumptions and governance practices. Examples include a continued trend toward increasing member contribution rates, lowering inflation assumptions, shortening amortization periods, holding actuarial assumed rates of return and lowering the number of retirees receiving health care benefits.
  • Income used to fund public pension programs came from member contributions (8 percent); employer (government) contributions (19 percent) and investment returns (73 percent).

“There is no question that public pension funds are continuing their strong recovery from the historic market downturn of 2008-2009,” Kim said. “The survey shows public pensions are strong and getting stronger, managing their assets efficiently and effectively, making plan design changes to ensure sustainability and are expressing strong and growing confidence about their readiness to address the challenges ahead.”

“The vast majority of public pension plans are thriving, more than adequately funded, inexpensive to operate and sustainable for the long-term. Policymakers, taxpayers and public employees can have confidence that public pension plans will be providing retirement security for covered workers – and thus making positive economic contributions to the communities they live in – well into the future.”

The National Conference on Public Employee Retirement Systems (NCPERS) is the largest trade association for public sector pension funds, representing more than 550 funds throughout the United States and Canada. It is a unique non-profit network of public trustees, administrators, public officials and investment professionals who collectively manage nearly $3 trillion in pension assets. Founded in 1941, NCPERS is the principal trade association working to promote and protect pensions by focusing on advocacy, research and education for the benefit of public sector pension stakeholders.

About Cobalt Community Research
Cobalt Community Research is a nonprofit research coalition created to help governments, schools and other nonprofit organizations measure, benchmark and manage their efforts through high quality and affordable surveys, focus groups and facilitated meetings. Cobalt is headquartered in Lansing, MI.

Thursday, November 20, 2014

State, school boards to get pension relief

Marsha Shuler
The Advocate

State agencies and local school boards won’t have to pay as much next fiscal year to cover pension costs for active employees after action Wednesday by a special panel.

All told, the Public Retirement Systems’ Actuarial Committee, called PRSAC, approved a $120 million reduction.

The committee must sign off on financial evaluations of the four statewide retirement systems, which among other things, sets the benchmark for investment earnings as well as required employer contribution rates.

Healthy investment earnings — and to some degree — reductions in work force contributed to the coming budget relief on employers.

State agency contributions to the Louisiana State Employees Retirement System, better known as LASERS, are projected to decline by $62.8 million in the fiscal year that starts July 1, 2015.

Meanwhile, school boards’ contributions to the Teachers Retirement System of Louisiana are anticipated to drop by $46 million and to the Louisiana School Employees Retirement System by $13 million.

The Louisiana State Police Retirement System remains flat.

“This is good news for the state as we begin the budgeting process for the next fiscal year,” Commissioner of Administration Kristy Nichols said in a statement issued by her office. “Saving money here helps free up funding for other areas.”

Louisiana School Boards Association executive director Scott Richard, who attended the meeting, praised the committee action. “The fact that school board contribution rates will go down for 2015-16 is welcome news - at a time when the costs to educate students in Louisiana continues to rise,” Richard said.

“The reduction in costs reverses the trend of recent increases that negatively affected local district budgets,” he added.

School systems have been hit by increases in health insurance costs for the teachers and other of their employees as well as Affordable Care Act changes that are expected to add to the expense.

“We look forward to continued collaboration with legislators and the retirement systems to ensure costs of pensions are reasonable and to avoid spikes in costs that take dollars out of the classroom,” Richard said.

The government employers are still on the hook for payments to defray the pension systems long-term debt known as the unfunded accrued liability, or UAL. The debt developed because past administrations did not contribute sufficient funds to cover benefits granted. A constitutional amendment requires the initial UAL to be paid off by 2020. The UAL has grown because of interest that piles up on that debt.