state pension legislation in 2009 and 2010
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State Pension Legislation
Ron Snell, NCSLFebruary 2010
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et rement ystem rou es ome romMany Directions
Asset Values
Aging Public Workforce
Declining Number of Public Employees State Fiscal Conditions
Questions from the public why government employeesshould look forward to a more secure retirement thanmost private sector employees.
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2009 Legislation Reflected Those Facts
A number of states acted to control long-term costs --which means reduced benefits promised to newemp oyees.
Some increases in required employee contributions
o s gn cant ene t ncreases
No shifts to defined contribution plans
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New Tiers for New Employees
Nevada PERS (including education personnel)
Increased age and service requirements
Somew at sma er ene it as a percent o ina compensation
Reduced benefit for early retirees further than previously
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New Tiers for New Employees
New Mexico PERS and Education Retirement Board
Increased age and service requirements
Disincentives or teac ers to retire e ore age o 0
Two-year increase in required employee contribution of 1.5%. . .Under legal challenge.
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New Tiers for New Employees
Rhode Island PERS (including education personnel)
Increased age and service requirements: from 60 to 62 years
Somew at sma er ene its as a percent o sa ary
Reduced amounts of future post-retirement benefit increases
.
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New Tiers for New Employees
Texas ERS (not including education personnel)
Increased age and service requirements for regular retirementrom o
Somewhat smaller benefits as a percent of salary
.
Prohibited use of accumulated annual and sick leave in
calculating eligibility for retirement (they can still be used forcalculation of final average salary)
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On the Revenue Side
New Mexico, Nebraska and Texas increased requiredemployee contributions for current employees.
Connecticut, Nevada and New Hampshire raised
contribution rates for future employees.no s prov e or ssuance o a most . on n
pension obligation bonds to fund state contributions to
.
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Post-retirement Benefit Changes
As noted, legislation reduced the commitment in anumber of states in conjunction with a new plan tier;
ou s ana so or ex st ng state emp oyees.
Georgia prohibited post-retirement increases for anyone- ,(including teachers).
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An Overview
The changes listed include almost all possibilities ofrevision in state retirement plans.
In all, over the years from 2005 through 2009, 18 states
have enacted such changes to reduce long-term costs of.
Only two states, however, have moved away from
.
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Alternatives to Defined Benefit Plans
Alaska closed its defined benefit plans for state and local
employees and teachers in 2005 and required all new.
In 2008 Geor ia created a h brid definedbenefit/defined contribution plan for new stateemployees. The defined contribution or 401(k)port on o t e p an s vo untary, t oug emp oyees areinitially enrolled in it.
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What's Likely for 2010?
Even if financial markets improve, and help retirementtrust funds recover, the state fiscal crisis, political and
emograp c ssues w cont nue t e r stress onretirement systems.
'changes I have reported for 2009--broad programs of
increases in em lo ee and em lo er contributionshigher age and service requirements for retirement;smaller post-retirement benefit increases.
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What's Likely for 2010?
Similar changes are proposed or under consideration inColorado, Iowa, Minnesota, New Jersey, Utah and
ermont, an were enacte n ew or at t e en o2009.
-- , ,Montana, Nebraska, New Mexico and Vermont-
reviewed the entire structure of their state retirementplans in 2009. Louisiana and Utah are consideringdefined contribution plans.
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What's Likely for 2010?
Myguessesare
More of the same: in many states, revision of many features ofre remen prov s ons o re uce ene s a e a a me.
Increased contributions from employees as partial matches ofincreased contributions from em lo ers
Widespread investigation of defined contribution plans, butfew adoptions.
Possibly more use of hybrid plans as an alternative to definedbenefit plans (over time, not necessarily in 2010).
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ens ons
Special Trackwww.ncsl.org/summit
www.ncsl.org
ro n . sne l l@nc s l . o rg
February 2010