|
|
8/25/2009
…CALSTRS CREDIT RATING DOWNGRADED CalSTRS credit rating was lowered by Fitch Ratings on August 21, 2009. Fitch cited investment losses and the fund's inability to raise employer contribution rates without the legislature’s permission. In the just-concluded fiscal year, the fund suffered a $42 billion loss. The downgrade by Wall Street will have little effect on CalSTRS itself but will likely mean higher interest costs for local governments that use the pension fund's credit rating when they borrow. CalSTRS, like CalPERS, earns fees from local governments that use their credit ratings when borrowing. CalSTRS has been lobbying for higher rates and control over rate setting for years with no luck. And the state's budget problems and current economic forces make it unlikely that contribution rates will be increased as much as they should for the foreseeable future. ...CALPERS WORRIED ABOUT UNSUSTAINABLE COSTS At a seminar this month of the Public Retirement Journal, Ron Seeling, the CalPERS chief actuary, warned that the pension system is facing decades of unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan. Anne Stausboll, the CalPERS chief executive officer, also mentioned that the system should take a proactive role on the sustainability issue and has announced plans to convene stakeholders – employers, labor, legislators and other stakeholders – and start discussing sustainability of pension benefits. Retiree healthcare was also discussed at the seminar, including approaches that limit benefits levels by instituting two‐tier plans, and cutting benefits only for new hires. A retirement actuary, John Bartel, told the meeting that two‐tier plans do not save much money, even after several decades. He said costs from the untouchable high‐benefit first tier, a vested right protected by contract law, continue to grow. According to Bartel, “unless that vested right issue changes…that second tier is not going to save money.” ...GOVERNOR PROPOSES PENSION REFORM AGAIN In his own attempt to head off the pension sustainability crisis (and more precisely its drain on the general budget), Governor Schwarzenegger proposed state employee pension and retiree healthcare reform as part of his budget negotiations. No bill language was introduced, and the proposal was ultimately dropped. However, the reforms he proposed are now gaining traction and are headed for public debate just a few years after his last pension reform proposal ended in a difficult fight with labor unions. This time the Governor has proposed creating a two-tiered system under which new hires would be provided lower benefits than current employees receive. The proposal would essentially return employee pension formulas for new hires back to 1999 levels. In 1999, the Legislature and Governor Davis enacted SB 400 to retroactively and prospectively boost pension benefits for any employee who retired on or after January 1, 2000. SB 400 also enhanced the average monthly compensation formula and provided a cost-of-living increase for state and school retirees who retired prior to 1998. In 2002, another bill (SB 183) expanded the definition of the State Safety retirement category to include many non-safety classifications, further enhancing the retirement benefit for employees in those classifications. For new employees the new proposal would:
…UPDATE ON RETIREMENT-RELATED BILLS The following updates the status of key retirement-related bills that were introduced this session. Bills that are dead for this year can be revived next year. It is important to keep in mind that new language can be amended into previously unrelated bills (called “gut and amend”) as the session continues. Each house has until September 11th to pass bills. We will update you next month about bills that make it to the Governor, who has until October 11th to sign or veto bills. BILLS THAT ARE ALIVE AB 125 (De Leon) PERS Savings Program for Private Sector AB 125 creates the California Employee Savings Program to be administered by PERS to offer one or more individual retirement accounts or defined benefit plans to California private employees. AB 399 (Brownly) PERS – Accumulated Contributions This bill requires PERS to provide members who have separated from all service, and who have attained age 70, with an election form to take a refund of their retirement account contributions or apply for retirement if vested. AB 399 has passed both houses. AB 506 (Furutani) STRS Post-Retirement Earnings Limits This bill extends and changes the post-retirement earnings limits under STRS until June 30, 2012. It prohibits STRS members during the first six months after retirement from returning to work if under age of 60. AB 506 has passed both houses. AB 654 (Mendoza) STRS – Penalties and Fees This bill would allow STRS to: 1) charge interest on installment payments to purchase “air-time”, 2) charge interest on delinquent contributions, and 3) assess penalties or fees on late or improper reports from schools and agencies. AB 1584 (Committee on Public Employees, Retirement and Social Security) Placement Agents Disclosures Among other provisions, this bill requires public retirement system boards to develop and implement a policy requiring the disclosure of payments to placement agents. The bill also expands post-employment restrictions on high level officers and investment staff of local pensions funds ('37 Act funds), so that they are consistent with restrictions that currently apply to officers and staff members of CalPERS and CalSTRS. SB 519 (Ashburn) PERS Death Benefits This bill would delete the provisions for PERS pre-retirement death benefit eligibility that would change the law on January 1, 2010, to spouses attaining age 62 instead of 60, and would instead maintain indefinitely the benefits that are currently in effect. SB 634 (Committee on Public Employees and Retirement) STRS Housekeeping Bill Among others, there is a provision to make membership election irrevocable for substitute teachers and other part-time employees who optionally select to participate in the STRS Defined Benefit Program (participation in the STRS is not mandatory for part-time employees) which would remain in effect until the member terminates employment. The bill also covers changes in eligibility for reduction-in-service, domestic partner rights, documentation for post-retirement earnings, beneficiary law, and other matters. SB 752 (Correa) Voluntary 2nd Tier in Orange County Retirement System This bill establishes a voluntary 2nd tier in the pension system in Orange County. New hires must elect to join one of the two tiers when they are hired. The new tier has a reduced pension formula combined with a defined contribution account. BILLS THAT WERE CHAPTERED AB 86 (Nava) Airport Police Officers The bill would authorize agencies to include certain airport law enforcement officers in the local safety member classification. This bill was introduced last session but was resisted by public agencies and public safety unions for cost reasons and to restrict which groups receive safety benefits. (Chapter 79, 2009) AB 232 (Hill) STRS Benefit Payment Information This bill would eliminate a requirement that STRS send a copy of the benefit payment information to any retired member, disabled member, or beneficiary who has payments transmitted by direct deposit or by mail to a financial institution. (Chapter 90 of 2009) AB 637 (Hill) Interest on PERS Payments AB 637 would require contributions made to PERS to be done by electronic funds transfer. It would also allow PERS to charge interest at the actuarial interest rate on any amount due and unpaid by a contracting agency until payment is received. (Chapter 118 of 2009) AB 966 (Committee on Public Employees, Retirement and Social Security) PERS Housekeeping Bill Among other provisions, this bill would provide that an employee whose appointment or employment contract does not fix a term of full-time, continuous employment in excess of 6 months is excluded from PERS membership unless exceptions apply such as if it requires service equivalent to an average of 20 hours a week for one year or longer or if a person completes 125 days or 1,000 hours. This bill is similar to the PERS housekeeping bill from last session that was vetoed by the governor. (Chapter 130 of 2009) Following are important dates/deadlines for the rest of the 2009 legislative year: August 28 – Last day for fiscal committees to meet and report bills to the floor. September 11 – Last day for each house to pass bills. October 11 – Last day for Governor to sign or veto bills. Feel free to contact PARS with any question or requests for further information. Additional news and an archive of past Legislative Alerts is available on the PARS website at www.pars.org. Thank you, PARS HAS ESTABLISHED TWO INNOVATIVE MULTIPLE-EMPLOYER TRUSTS TO ASSIST PUBLIC AGENCIES WITH PRE-FUNDING THEIR OPEB (POST RETIREMENT HEALTH CARE) OBLIGATIONS UNDER GASB 45. FOR MORE INFORMATION, CONTACT: MAUREEN TOAL The contents of this publication reflect PARS’ understanding of the facts. Before taking any action based on this information, consult professional advisors regarding your agency’s specific objectives and circumstances. For further information, contact PARS. |
|
PARS
Legislate Alerts are an e-distribution service powered by |
|
|
|
If you have
problems viewing this in your mail client, |
|
|
