1 / 49

Dana Bilyeu

National Trends and Federal Update. Dana Bilyeu. Executive Director, NASRA LAPERS, September 17, 2019. Topics. State Pension Modifications Contributions and Costs Assumptions and Investments Federal, Regulatory and other Interests Update. Pension Modifications.

lotus
Download Presentation

Dana Bilyeu

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. National Trends and Federal Update Dana Bilyeu Executive Director, NASRA LAPERS, September 17, 2019

  2. Topics • State Pension Modifications • Contributions and Costs • Assumptions and Investments • Federal, Regulatory and other Interests Update

  3. Pension Modifications

  4. States Enacting PensionModifications 2007-2018

  5. State Pension Reforms Affecting Broad Groups of Current ActiveParticipants 37states

  6. States Increasing Employee Contribution Rates,2009-2018 38states NASRA Issue Brief, Employee ContributionRates

  7. States Reducing Pension Benefits,2009-2018 40states NASRA Resource, Retirement System Benefits & Eligibility Requirements for General Employees &Teachers

  8. States Making Changes to Cost-of-Living Adjustments,2009-2018 30states NASRA Issue Brief, Cost-of-LivingAdjustments

  9. States Adding Shared-Risk Plan Design Elements,2009-2018 24states NASRA Shared Risk In-Depth Review

  10. States Creating New Hybrid Plans,2009-2018 10states NASRA Issue Brief, State Hybrid RetirementPlans

  11. Statewide Hybrid Plans and Relative ParticipationRates NASRA Issue Brief, State Hybrid RetirementPlans

  12. Contributions and Costs

  13. Median Employee and Employer Contribution Rates, FY 02 to FY18 For general employees and teachers; does not include public safetypersonnel. NASRA Issue Briefs on Employee and Employer Contributions

  14. Median and Weighted Avg. ARC/ADC Received by 112 Plans, FY 01 to FY17 NASRA Issue Brief on State and Local Contributions to Statewide Pension Plans

  15. Distribution of ADC Received by 111 Plans, FY17 NASRA Employer Contributions Issue Brief

  16. Median and Weighted Average of ARC/ADC Paid by State, FY 01 to FY17 NASRA Employer Contributions Issue Brief

  17. Employer (taxpayer) Spending on State and Local Public Pensions,1988-2017 NASRA Issue Brief, Taxpayer Spending

  18. Public Pension Fund Sources of Revenue,1989 to2018 US CensusBureau

  19. Assumptions and Investments

  20. Inflation Assumptions andExpectations The breakeven rate implies what market participants expect inflation to be in the next 10 years, onaverage.

  21. Investment Return Assumptions, FY 01 toLatest

  22. Actuarial Assumptions: Inflation, Nominal, andReal Public PlansData

  23. Median Public Pension Investment Returns for Periods Ended 6/30/18 and12/31/18

  24. Median Investment Returns for Periods Ended6/30/19

  25. Median Annual Change in Payrolls FY 02 to FY18 OldNormal NewNormal?

  26. Federal, Regulatory and Other Interests

  27. DividedCongress

  28. Heightened Congressional Focus on RetirementIssues • Retirement SecurityLegislation • Solvency of Pensions in OtherIndustries • Social Security • Infrastructure • Tax Legislation/RevenueRaisers

  29. Retirement Security Legislation • Setting Every Community Up for Retirement Enhancement Act (SECURE) and Retirement Enhancement and Savings Act(RESA) • ▲ Modification of RMDs (age 72, Stretchprovisions) • ▲ Plan loans for birth/adoption ofchild • ▲ Provisions to promote private plan expansion, pooling • Other bills in theworks: • ▲ Portman-Cardin’s New Retirement Security & Savings Act (S.1431) • ▲ RESA 2.0 underdevelopment • ▲ Commission on Retirement Security Act of 2019(S.1435)

  30. Multiemployer Pensions • Insolvency facing 10% of plans and the PBGC multiemployer insuranceprogram • ▲ Unique issues - Federal funding rules, industry changes, orphanedretirees • ▲ Joint Select Committee of Congress could not agree on a solution • Conflation with publicplans • ▲ Central “States” Pension Fund is large plan facinginsolvency • ▲ Federal loans/bailouts are underdiscussion • ▲ Discount rates are a majorfocus

  31. “NoBailouts” • State and Local Pensions Accountability and SecurityAct • ▲ Rep. Rep. Babin (R-TX), Norman (R-SC),Hice(R-GA), McClintock (R-CA), Roe(R-TN),Weber (R-TX), Daniel(R-FL) • ▲Prohibits Treasury and Fed from providing bailouts or other financial assistance to a publicpensions • Sense of the SenateResolution • ▲ Sen. Cotton (R-AR), “the Federal Government should take no action to redeem, assume, or guarantee any debt, including pension obligations, of aState"

  32. Public Employee Pension Transparency Act(PEPTA) • (not reintroduced thisCongress) • Requires costly/conflicting federal reporting requirements on state and local governments and threatens to eliminate tax-exemption of munibonds • Strong stakeholderopposition: • Does NOT lower costs, protect benefits or improve pension financing • Overlooks existing significant public reportingand • disclosures, including online database • Ignores significant changes have been made at state/local level – none have required federal intervention

  33. SocialSecurity • Social Security 2100Act • Sponsored by Rep. John Larson (D-CT), Chairman of the Ways andMeans Subcommittee on Social Security and over 200others • Would expand Social Security benefits and taxes and bring the program into long-termsolvency. • Mandatory SocialSecurity • No serious proposals to impose Social Security on all public employees introduced. • Increased interest in FICA replacement plan regulations and safety net for those notcovered

  34. Social Security Offsets(GPO/WEP) • New Equal Treatment of Public Servants Act (Ways & MeansRanking Member Brady,R-TX) • ▲ Would replace the WEP with a new proportionalformula • ▲ Broad grandfather for those age 21-59 in 2019, rebate ($100/month, indexed) for those 60 andover • ▲ Pilot partnerships between the SSA, state/local pension systems, potentially IRS, to improve info about noncoveredpensions • Social Security Fairness Act of 2019 (H.R.141 and S.521) would repeal WEP andGPO • Social Security Fairness for Firefighters and Police Officers Act (S. 710) would exempt certain firefighters and police officers fromWEP/GPO

  35. NationalInfrastructure Development BankAct • Draft legislation would issue up to $300 billion of 40-year “Rebuild America Bonds” to provide capital for a U.S. infrastructurebank • ▲ Bonds would have a set interest rate that’s 200 bps more than 30-yearTreasuries • ▲ They would be sold exclusively to public and private pensionfunds • ▲ They would have to be held for at least 10years

  36. Strengthening Pensions Through Infrastructure Investment Act (115thCongress) • Codifies the arbitrage exemption for infrastructure in recent Treasury regs • Clarifies that “use” by a public pension fund of public infrastructure property shall not be treated as private business use for tax-exempt debt financing • Could affect investments, asset transfers,assets-in-kind (“AIK”)

  37. Recent Tax-Related Retirement Proposals andRevenue-Raisers • “Rothification” • ▲ Making all/some employee contributionsafter-tax • Removing “special rules” for governmental plans • ▲ Additional catch-ups contributions for457/403(b) • ▲ Exemption from 10% early distribution penalty for 457plans • ▲ Exclusion from Unrelated Business Income Tax (UBIT) on public planinvestments

  38. Tax-related Proposals,cont. • Pick-upcontributions • ▲ Permitting elections between tiers (toaddress • IRS Rev. Rul. 2006-43, PLR prohibitingCODAs) • ▲ H.R. 3213 (Rep. Roe,R-TN) • “Simplification” • ▲ After-tax Universal Savings Accounts(USAs) • ▲ Combining 457/403(b)/401(k)plans • Financial Transactions Tax (FTT) or other tax oninvestments

  39. Regulatory Activity • Missing participants • ESG (Environmental, Social, Governance • Pending public planregulations • Actuarial Standards ofPractice

  40. MissingParticipants • Increased DOL audit activity of privateplans spurs need for moreclarity • IRS field memorandum issued on search standards • IRS guidance (in consultation with DOL/PBGC) expected by October 2019to additionally provide clarity on withholding andreporting

  41. ESG • DOL Field Assistance Bulletin2018-01 • ▲ “must not too readily treat ESG factors as economically relevant to the particular investment choices at issue when making adecision” • Executive Order regarding energy signals concern ESG is hamperingindustry • ▲ DOL required to study private retirement plan energy investmenttrends • ▲ Review proxy votingguidance • New policy organizations forming to oppose divestment, proxy advisory firms,ESG

  42. Pending Regulations Affecting PublicPlans • Definition of governmental plan(414(d)) • Normal retirement ageregulations • Pension cost principles for federal grants/awards capping contributions to ADC or new GASB “pensionexpense” • ▲ New proposed rules expected this fall as part of required lookback. Pensions will likely be addressed, possibly in limitedfashion.

  43. Actuarial Standards of Practice(ASOP)Revisions • Actuarial Standards Boardproposing changes to ASOP 5 • Likely will require market-basedalternativeliability measurement to becalculated, disclosed for all fundingvaluations • Private single-employer andmultipleemployer do not appear to be focused on this(yet)

  44. Continued Interest by MarketRegulators • Securities and ExchangeCommission • Municipal Securities Rulemaking Board expanded jurisdiction under Dodd- Frank Act • Financial Stability Oversight Council (FSOC) monitoring of markets and state/local economies • Treasury Office of State and LocalFinance • U.S. Census Bureau • Federal Reserve “Flow ofFunds” • ▲ New calculation of public planliabilities

  45. Expanding FederalRelations • State/Local Government Associations and EmployeeOrganizations • ▲ Coming together on advocacy and a common set offacts • Private Sector Retirement Groups and EmployeeOrganizations • ▲ Building understanding, support &/or lesseningthe • muddling ofissues • Policy Organizations, Think Tanks,Academics • ▲ Education, redirection and/oropposition

  46. Educating FederalPolicymakers • Coordinated efforts to get out the facts and set the recordstraight

  47. Retirement System Outreach • Help congressional delegations understand: • ▲ Your retirement system and its importance to their constituents andcommunities • ▲ Pending federal legislation or regulations that could impact your system and how they canhelp

  48. Questions? Thank you

More Related