Save Pension Benefits

Brothers and Sisters,

As we fight to save pension benefits, here's some good information from the Public Employees for Pension Responsibility (PEPR). Our own Matt Zuvich chairs PEPR.

Public Employees Oppose ESB 6378 It is Bad Policy

ESB 6378:

• Closes Plan 2 to any new members

• Skips the state’s payment towards the Plans 1 Unfunded Liabilities

• Will cost local Government up to $81 million over 25 years

• Eliminates the early retirement options for new hires who work at least 30 years, per fiscal note.

Skips the state’s 2011-13 payment towards the Plans 1 Unfunded Liabilities:

• One of the principal reasons the long closed Plans 1 (TRS and PERS) have unfunded liabilities is due to past legislature’s not making their payments.

• The current liability for these two plans is about $4.3 billion, per 6387 fiscal note.

• Missing pension payments could cause further reduction of the state’s credit rating due to increasing the Unfunded Actuarial Accrued Liability (UAAL).

• Suspending this payment for the short-term savings results in employers experiencing significant long-term costs will be fully realized by employers. It increases pay-go* risk and the chance that the total system funded status will drop below 60 percent, per 6387 fiscal note.

Closes Plan 2 to new membership:

• Currently newly hired public employees can choose between a more secure, safe fully defined benefit plan (Plan 2) or one that is portable and provides the opportunity to receive returns on your investments (Plan 3) This bill removes choice.

• The cost for Plan 2 is shared equally between the employer and the employee.

• The State Actuary notes that closing Plan 2 to new members will make that plan more costly to the employer due to shifting the cost risk and because of the impact on the investment practices at the State Investment Board.

Eliminates the early retirement options for new hires who work at least 30 years:

• At a modest cost, the state has enacted two distinct early retirement options for career service employees who work at least 30 years in public employment:

o A reduction of 3% for each year of age below normal retirement age of 65 for those who are at least age 55 and have 30 years of service.

o A lower reduction for each year of age such that those age 62 with 30 years of service may retire at their normal retirement benefit level with no penalty.

o This latter benefit was granted in lieu of the eliminated gain sharing benefit in 2007. It has been the subject of litigation which is pending court action.

• The Actuarial Fiscal Note states that, according to current law, if the courts, through a final court action, reinstate gain-sharing benefits, the 2008 Early Retirement Factors and plan choice for TRS and SERS are removed prospectively by operation of law. Should this occur, then the expected net savings attributed to this bill would become a cost.

• • Continue to call your legislators at 1-800-562-6000 to urge them to reject the bad Senate Republican budget (ESB 5967) and the bad Zarelli pension bill (SB 6378) because they would gamble away your pension benefits.

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