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State Plan Reform UC Retirement Security Institute New America Foundation May 19, 2010

State Plan Reform UC Retirement Security Institute New America Foundation May 19, 2010. Keith Brainard, Research Director National Association of State Retirement Administrators. Key elements of public pension reform.

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State Plan Reform UC Retirement Security Institute New America Foundation May 19, 2010

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  1. State Plan ReformUC Retirement Security InstituteNew America FoundationMay 19, 2010 Keith Brainard, Research Director National Association of State Retirement Administrators

  2. Key elements of public pension reform • Some public pension plans are in need of reforms to restore their long-term sustainability • Changes needed to restore sustainability range from incremental to fundamental • Types of reform include changes to benefit structures, financing arrangements, and actuarial methods and processes • Often, minor changes can have a major effect on plan costs and funding condition

  3. Public pension reform and legal protections • The type and extent of public pension reforms is affected by • State constitutions • Statutes • Case law • Political will and strength of the legislature, governor, and public employees

  4. Groups affected by public pension reform • New hires • Existing actives • Existing retirees

  5. Types of reform • Incremental • Minor adjustments to plan design, financing structures, and actuarial methods and processes, within the existing framework • Fundamental • Major adjustments to plan design, financing structures, or actuarial methods, or a switch in plan type, from traditional pension to defined contribution or hybrid

  6. Examples and elements of reform in other states • Normal retirement eligibility • Higher age, more years of service • AK, CO, IL, KS, ND, NJ, NM, NV, RI, TX, VA • Early retirement eligibility • Typically, but not always, commensurate with increases in normal eligibility • Cost-of-living adjustments • AK, CO, MO, SD, IL

  7. Examples and elements of reform in other states • Reduced retirement multipliers • NV, RI • Longer final average salary period • Often from 3 years to 4 or 5 • Higher employee contributions • CO, IA, KS, MS, NE, NM • Contributions for the first time • New hires in Virginia

  8. Examples and elements of reform in other states • Longer vesting periods • KS, MS, ND, NY • Anti-spiking provisions • CO, IA, GA, LA, KS, NV • Return-to-work limits • AR, GA, IN, WA • Benefit limits: dollar limit or % of FAS • IL

  9. Fundamental changes • Switch to defined contribution • Utah (optional) • Switch to hybrid • Utah (optional) • Kentucky • Georgia

  10. Distinguishing features of public pension plan designs Mandatory participation Cost-sharing between employers and employees Pooled assets Reduce administrative costs and distribute risk Assets that are professionally invested Annuitized benefits

  11. More information • www.nasra.org/resources/reports.htm • Keith Brainard, NASRA Research Director • keithb@nasra.org • 512-868-2774

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