Tuesday, March 21, 2017

5 THINGS YOU NEED TO KNOW ABOUT PENSION LEGISLATION

The State Affairs committee of the Texas Senate held a public hearing Monday, March 20, and discussed five pension bills.
Here's a recap:

1. POLITICS VS. VOTER APPROVAL

Senate Bill 151 authored by Sen. Paul Bettencourt, R-Dist. 7, is seeking to require funds to obtain voter approval before issuing pension obligation bonds. Some fear the bill would politicize pensions. 

A representative with the Houston Police Officers Union testified before the committee and said if the pension obligation bonds were to be presented to voters and fail to gain support, it would be because of politics. The committee's chair, Joan Huffman, R-District 17, however, said she believes voters would support bonds if a case were made. TEXPERS confirmed its opposition to the bill. 

The bill was voted out of committee and moves to the full Senate.

2. UNFUNDED REPORTING REQUIREMENT

Senate Bill 509, authored by Huffman, would add a new reporting requirement for public pensions. The State Affairs committee chairwoman told the committee that she authored the bill in light of pension fund problems in Dallas as a means of increasing transparency in asset reporting. 

The bill would require municipal, police and fire pension funds greater than or equal to $100 million to submit an evaluation of investments and performance every three years. Funds with $30 to $100 million would present a report every six years. Funds under $30 million would be exempt from the reporting requirement. 

TEXPERS' executive director, Max Patterson, and board president, Paul Brown, testified against the bill during the hearing. Patterson said funds already provide reports to the state's Pension Review Board and the board can always request the information without establishing legislation. Brown said the legislation is an unfunded mandate and reiterated that some systems already provide the information to the PRB. 

Anu Anumeha, executive director of the PRB, said the bill would require funds to obtain someone outside her state agency to check assets to ensure they are accurate. The bill was voted out of the committee.

3. ANOTHER PENSION SYSTEMS STUDY

The state affairs committee also held a public hearing regarding Senate Bill 936, which seeks to establish a joint interim committee to study the public retirement systems in Texas. 

The bill's author, Huffman, told the committee that people think she is trying to achieve a particular result, such as convert defined benefit plans to defined contribution plans, in establishing the committee but that isn't the intent. Huffman said the intent is to study the pension systems to save them. 

However, Huffman did state that possible conversion from DB to DC would be considered by the interim committee as an option. The bill is supported by the Texas Public Policy Foundation, a partisan think tank based in Austin. The foundation supports the bill stating that it will restore local control. However, the Texas Retired Teachers Association conducted a study in 2011 and found that when comparing DC plans to DB plans, DB plans cost significantly less to operate. 

4. TO POB OR NOT TO POB AND OTHER QUESTIONS

Senate Bill 2190, also by Huffman, proposes changes to three pension funds in Houston. The state affairs committee discussed the bill that is based on negotiations between the city of Houston and the municipal, police and fire funds. 

Houston Mayor Sylvester Turner spoke to the committee about negotiations and said the city wants to honor the defined contributions of current employees and said any shifting of new employees to defined contribution plans wouldn't reduce the city's unfunded liabilities. The bill received some criticisms from representatives of the Houston Firefighters' Relief and Retirement Fund who said the negotiated bill has new items it never agreed to, such as parity in pensions without equality in pay. 

The Huffman bill also includes the use of pension obligation bonds to help raise funds to pay for the city's financial shortfall. The POB, according to the bill, would require voter approval, however. A representative from the city's municipal employee pension fund said the system cannot support the bill with the voter approval provision. 

Also, the firefighter's fund would be the only fund not receiving money from any approved pension obligation bonds, according to a representative of the Houston Professional Firefighters Association who testified to the committee. The association opposes the bill as it is currently written. 

During the hearing, a committee member asked Robert May, a member of the Pension Review Board and a professional actuary, if the pension reforms proposed could still work without the bonds. He said it would, however, the city's contribution rate would increase by 10 percent of payroll. 

Also, while discussing the negotiation process, Mayor Turner said all but one fund provided actuarial information. David Keller Jr., chair of the Houston Firefighter's Relief and Retirement Fund, said his fund cannot release actuarial reports while in litigation and under a judge's order not to share the information. Huffman requested the fund produce the report no later than March 21.

The bill was voted out of committee.

5. HUFFMAN: NO STATE FUNDS

Senate Joint Resolution 43 was discussed during the state affairs public hearing. The bill, by Huffman, is a proposed constitutional amendment that would prohibit the use of state funds to pay for the obligations of local public retirement system. 

Huffman told the committee that the state is not obligated to pay local pension debt. The bill was not voted out of committee.

Friday, March 17, 2017

Will Americans see cuts to pension benefits?

Americans made it clear during the recent national election that they wanted to see a change in Washington, D.C. With a possible cut in pension benefits, many people feel they may not see that change. 

Read more.


Monday, March 13, 2017

TEXPERS renews accreditation for mandated trustee training program


The Texas Association of Public Employee Retirement Systems recently renewed as a Texas Pension Review Board’s Minimum Education and Training Program accredited sponsor of core content training  and continuing education for trustees and administrators.

The Pension Review Board is an independent state agency that oversees and reviews state and local government retirement systems and accredits training programs for trustees and administrators of public retirement systems. The PRB announced TEXPERS as a renewed accredited sponsor of core and continuing education activities Feb. 27.

The PRB mandates that a new trustee or administrator of a public pension system must take seven hours of training during their first year of service. Topic areas include fiduciary matters, governance, ethics, investments, actuarial matters, benefits administration, and risk management.

During a trustee or administrator’s subsequent years of service, they are required to take an additional four hours of continuing education every two years. Education includes these core content areas or non-core areas: compliance, legal and regulatory matters, pension accounting, custodial issues, plan administration, Texas Open Meetings Act, and Texas Public Information Act. 

TEXPERS developed its Basic Trustee Training class to fulfill the requirements of the PRB’s Minimum Education and Training Program, or MET. It is offered at least twice a year before TEXPERS’ conferences.

In addition to the basic training, the association periodically offers advanced trustee training to help them meet the PRB’s continuing education requirements. Click here to learn more.


Some say public officials serving time shouldn’t receive pensions


Texas government officials convicted on corruption charges are still eligible to collect public pensions, but not everyone thinks they should be able to benefit from their retirement. Sen. Van Taylor, R-Plano, authored Senate Bill 14 that includes a provision that would prohibit convicted criminal lawmakers from receiving their pension benefits.

Jackie Wang of The Texas Tribune found several “former elected officials with prior felony convictions who are potentially collecting retirement payouts.” In an email exchange with The Texas Tribune, Taylor said the idea that criminal politicians continue to receive government pensions while serving time is “appalling.”  

Some people are questioning if the bill itself is ethical, however. Is it fair to limit a person’s retirement benefits if the crime was not related to the government official’s duties? Although a person cannot collect Social Security while in prison, other retirement benefits of private citizens are not revoked if they are convicted of a crime.

And consider this: A veteran receiving retired military pay while in prison also is able to collect federal pensions, but with some exceptions, according to Miltary.com.  Veterans who are convicted of disloyalty to the United States such as espionage, treason, and sabotage can lose their benefits. In other words, the charges must be related to their service to be revoked.

Some say the same should be for government officials – only revoke benefits if criminal convictions are related to the public official’s office. What do you think?
Publication names TEXPERS associate member ‘Plaintiff Firm of the Year’

Law firm Bernstein Litowitz Berger and Grossmann, a TEXPERS associate member, recently was named “Plaintiff Firm of the Year” by Benchmark Litigation, publisher of financial news magazines.

The publication awarded BLB&G with the title during its 2017 Benchmark Litigation awards dinner Feb. 16. The ceremony recognizes the work of attorneys, law firms, and in-house counsels during the last year.

Tony Gelderman
"This prestigious award is very gratifying to our firm,” said Tony Gelderman, counsel of BLB&G. “We are truly dedicated to providing the very best service and representation to our public fund clients, many of which are Texas funds."

BLB&G is the only plaintiff firm in the United States ranked Tier 1 by Benchmark for securities litigation. Max W. Berger is the managing partner of the firm, which advises public pension funds and institutional investors on securities litigation, corporate governance and shareholder rights issues. The firm has 21 partners, nine counsels and 24 lawyers with offices in New York, San Diego, Chicago and New Orleans.

Click here to read Benchmark’s full analysis of the firm.

BLB&G is the first securities litigation firm allowed to join TEXPERS. The firm has been a member of the association since 2004.

Pension Fitness

Accounting rules may be the thorn in the foot of pension systems


State and local pension plans often are in better shape than their accounting reports indicate, according to a new research report out of the University of California Berkeley’s Haas Institute for Fair and Inclusive Society.

The new report argues that a perceived crisis in public pensions is mainly due to misguided accounting practices mandated by the Government Accounting Standards Board, a private group that sets standards for pension accounting.

According to the report’s author, Tom Sgouros, the accounting rules were designed for the private sector and do not hold up to public sector needs. The report centers on pension obligations and the ratio between the assets and the future liabilities, or funding ratio.

Essentially, Sgouros says the rules are meant to insure against risks that public pensions systems do not face and fail to protect against the risks public pension systems do come up against.  That’s because governments do not operate in competitive investment markets and there is not much of a threat of liquidation. The rules, Sgouros wrote in the report’s abstract, “also encourage ‘reforms’ that frequently do not improve the financial situation of a given pension system.”

He suggests a new accounting system be adopted that would offer a better picture of a system’s financial health and reduce the waste of overfunding.

The Week’s Ryan Cooper reported that public pensions are in better shape than people think, and cited the Haas Institute’s report. You can read Cooper’s story here and access the full Haas Institute report by clicking here

Friday, January 13, 2017

Pension Protection Act of 2006 Did Little to Relieve Retirement Crisis


Congress’ Pension Protection Act of 2006 may have resulted in enrollment increases into defined contribution pension plans, but it provided little relief to the retirement crisis in Texas, or elsewhere in the United States, according to a recently released brief by the National Institute on Retirement Security.

The institute’s November 2016 report examines the impact of the Pension Protection Act 10 years since enacted. Trends in defined benefit and defined contribution retirement plans for private sector workers were analyzed. As Texas legislators and local public employee pension funds debate the merits and cost of various retirement plan structures, including adopting defined contribution plans, the report’s private sector findings could serve as a crystal ball of what could happen to Texas’s public workforce. 

According to the institute’s report, the Pension Protection Act made employers less willing to continue offering defined benefit pension plans, which resulted in fewer Americans with pensions. The act lead to more workers covered by defined contribution plans that use automatic enrollment in 401(k) accounts; however, that wasn’t much of a good thing. In fact, the number of households with retirement plans still fell from 55 percent in 2007 to 51 percent in 2013.

Plus, according to the NIRS brief, automatic contributions to defined contribution accounts are too little to provide most middle-class workers with retirement savings. If Texas legislators and local government pension funds decide to adopt defined contribution plans, it could mean the state’s public sector employees may not accumulate enough funds to ensure an adequate retirement income.

Read the entire report online.




   















The graph depicts U.S. Department of Labor and U.S. Census Bureau data regarding private and public pension contribution levels from 2005-2013. Corporate pension contributions, the green line, was much more volatile compared to public pension plan contributions during the time period.