For the past several years, public pension reform has been a hot topic as states and municipalities wrestle with how to keep their retirement plans funded. As many Colorado PERA members and retirees know, 2018 saw the Colorado General Assembly pass a significant reform bill, and numerous other states followed suit in 2019. Here’s a sampling of the new efforts as of mid-year.
Increased employee contributions over two years, from 6.0 percent to 7.0 percent by July 2020. Increased employer contributions from 12.9 percent to 14.9 percent starting July 2019.
Pending as of June 2019
The Bluegrass State has been debating a variety of pension reform options for about two years. In early June, the state Supreme Court ruled against the governor’s attempts to keep a financial analysis from public disclosure, and the governor has indicated that a special session of the state legislature may be necessary later this year to resolve various disputes.
Comprehensive legislation changed the salary thresholds that determine employee contribution rates; increased employer contribution rates from 13.9 percent to 14.5 percent starting July 2019; changed years-of-service multipliers and highest average salary (HAS) guidelines for new hires; increased minimum retirement age for new hires; and changed return-to-work rules.
Eliminated retiree health insurance credit for new hires after January 2020; redirects employer contributions of 1.14 percent of salary to the retirement plans; modified HAS calculations for retirees after January 2020; and reduced the HAS multiplier from 2 percent to 1.75 percent.
Extends the fund’s minimum payment schedule by eight years; redirected a portion of employee contributions (depending on hire date) into an account that supports pension benefits; cut 30-year employees’ overall benefits by 1 to 2 percent for those making more than $30,000 per year; mandated a one-time, $100 million contribution to an “incentive fund” that will provide a 25 percent match to extra employer contributions; gave employees more control over investment allocations; removed certain limits on working after retirement; and directed some proceeds from the Oregon Lottery to the employer incentive fund.
In March 2019, California’s state Supreme Court upheld 2012 reforms that curtailed the purchase of service credits and raised employee health care contributions.
In June 2019, two retired teachers sued the State Teachers Retirement System of Ohio over the indefinite elimination of annual increases for retirees. The plaintiffs are seeking to certify their suit as a class action.
In June 2019, Rhode Island’s state Supreme Court upheld the city of Cranston’s 2013 reforms that suspended cost-of-living adjustments, increased retirement ages, and introduced a hybrid DB/DC plan.