Retirement bill status
Note – MEA-MFT President Eric Feaver is quoted extensively in the two newspaper articles below. MEA-MFT has worked hard, every day, in this legislative session to protect our members' public employee defined benefit plans.
Considering the bills some legislators introduced (See HB 197, SB 54, and SB 328 below), and the support too many crash-and-burn-government legislators (a long list starting with Senators Joe Balyeat and Dave Lewis) gave these bills, it is amazing we are where we are right now: one anticipated veto short of maintaining our defined benefit plans for the immediate next generation of public employees: state, county, university classified, and all k-12 public school. If so, partial success at least.
But this session is not yet over. The governor must veto SB 54 (Balyeat).
And the Senate State Administration Committee may have mortally wounded HB 632 (Taylor), killing HB 122 (Malek) in the process. Again, see below. If so, too bad, because 632 is the only bill that creates a new state revenue stream dedicated to reducing unfunded liabilities in retirement systems in which thousands of our members are enrolled including public employees, teachers, and correctional officers. Opportunity lost.
If things end as MEA-MFT expects, the legislature will have purposefully failed to address the unfunded liability in the Teachers Retirement System as we vigorously proposed to do in HB 189 (Barrett) - http://data.opi.mt.gov/bills/2011/billpdf/HB0189.pdf.
189 not only positively addressed unfunded liability in TRS, it provided an attractive incentive for teachers to begin AND finish lifetime professional careers in Montana.
More frustrating, had we been given half a chance we would have happily amended 189 to further enhance its capacity to reduce unfunded liability. Yes, for sure, crash-and-burn-government legislators killed what could have been THE retirement bill of the session. More opportunity lost.
Legislature looks at pensions
Some small changes accepted, major reforms rejected
By CHARLES S. JOHNSON Gazette State Bureau | Sunday, April 10, 2011
HELENA — As the 2011 Legislature winds down, lawmakers have resisted overhauling the state's financially troubled public employee retirement systems, but instead have made smaller changes aimed at helping improve the funds over the long haul.
"I think on balance we'll end the session with some modest changes in benefits, and new hires will have less benefits and more contributions," said Eric Feaver, president of MEA-MFT, a union representing educators and state employees. [not a lot less and not a lot more - ef] "But we will have maintained our 'defined benefit' system."
Agreeing was Tom Schneider, lobbyist and former executive director of the Montana Public
"I think we're going to make some strides in at least ensuring that we don't continue to create more debt," he said. "We feel we're going to have to make some changes for the new employees to make sure the pensions are there for the new employees."
The two union leaders cited some bills that adjust contribution rates and make other changes to
help improve the systems' financial outlook. In some case, new employees, as well as employers, would pay a higher contribution rate, while in other cases, employers would pay more.
HB122, by Rep. Sue Malek, D-Missoula, adjusts the Public Employee Retirement System, while HB134 and 135, by Rep. Carolyn Squires, D-Missoula, change elements of plans for the Game Wardens and Peace Offers Retirement System and the Sheriffs' Retirement System.
The various Montana public employee pension funds, like other public and private pensions funds throughout the country, were battered by the stock market crash in 2008. Here, pension fund investments lost about 21 percent of their paper value.
As a result, most of these funds have amassed huge unfunded actuarial liabilities, or potential debts, that the state is required to address over time.
As of mid-2010, actuaries determined the Teachers' Retirement System (TRS) had an unfunded liability of $1.56 billion, while the separate Public Employees' Retirement System (PERS) showed an unfunded liability of $1.35 billion. Neither pension fund amortizes over any length of time.
Unlike some past sessions, the Legislature hasn't dumped any surplus cash to help bail out the Teachers' Retirement and Public Employees' Retirement systems.
However, HB632, a late-introduced measure by Rep. Janna Taylor, R-Dayton, would redirect some coal-tax revenues — not the constitutional trust fund — to slowly start paying down the potential deficits in four public employee funds over time. Starting in 2014, her bill would divert more than $15 million a year from the state general fund to four pension funds: Teachers' Retirement System, Public Employees' Retirement System, the Sheriffs' Retirement System and the Game Warden and Peace Officers' Retirement System.
The bill is before a Senate committee and has drawn support from public employee unions, although it has critics, who oppose the diversion of general fund money.
"It is a significant step for solving an unfunded liability," Taylor said in the House.
"Janna Taylor's bill would be a little frosting on the cake (besides the other bills) because it would be a steady source of income," Schneider said.
Feaver said he also supports the bill.
"It won't eliminate the unfunded liabilities in three to 10 years, but it does designate a fairly
robust stream of money into these systems," he said. "It's the only bill here that commits the state to anything in terms of reducing unfunded liabilities."
Some legislators advocated that the state switch from its current "defined benefit" system to a "defined contribution," an effort opposed by public employee unions.
State and local government employees and teachers now have what are called "defined benefit" retirement plans that guarantee retirees a fixed monthly pension based on a formula that takes into account their years of employment and their salary, based on the average of the three highest years of salary. Both the employees and employers contribute to these plans. Retirees are guaranteed these pension amounts, regardless of how the state investments of pension funds have fared.
"Defined contribution" pension systems are similar to a 401(k) for employees used by many private employers. Both employees and employers contribute to a fund, managed by employees for their use when they retire. Returns vary widely, depending on individuals' investment choices and the stock market. Unlike "defined benefit" plans, "defined contribution" plans do not guarantee a fixed monthly benefit when people retire. Instead, employees receive whatever money is in their account when they retire.
A House committee tabled and likely killed House Bill 197, by Rep. Brian Hoven, R-Great Falls. It was a proposed constitutional amendment that, if approved, would have allowed the Legislature to change public employee retirement contracts with members to make the pension systems actuarially sound. He had wanted to change to a "defined contribution" plan for new employees.
Also tabled was SB328, by Sen. Dave Lewis, R-Helena, which would have required all new PERS members to be in a "defined contribution" plan. It would have had a fiscal impact of $160 million a year. His bill would have required governors to propose in their biennial budgets how they intend to address the pension financial problem.
"I carried the message anyway," Lewis said. "It's really hard to get people to focus on what a huge problem we have. Right now, we're running a Ponzi scheme. We're using contributions of (current) employees in the future to pay of the pensions of retired employees. We'll just go along pretending we have money till we run out."
Feaver said he's delighted that Lewis' bill was tabled because it "orphans" the existing PERS members. New public employees hired would not be paying into PERS, nor would employers.
"If you don't leave a mechanism to fund the unfunded liability, you've just (exaggerated) the problem," Schneider said.
Another bill, SB54, by Sen. Joe Balyeat, R-Bozeman, has passed both houses and awaits the signature or veto of Gov. Brian Schweitzer. The bill, which came out of an interim legislative committee, would set up a hybrid, cash-balance plan for new TRS hires, one that Balyeat said borrows the best from both the defined benefit and defined contribution plans.
Balyeat said it would encourage participants to work longer by offering them "greatly increased benefits," while at the same time giving employees flexibility if they choose to retire sooner. It would also close some existing loopholes that drive up costs, he said.
"The normal cost for this plan is the lowest of the alternatives we looked at," Balyeat said. "Thus we can take the extra which is being contributed and use it to help reduce our unfunded liability."
MEA-MFT is urging Schweitzer to veto this bill. Feaver called the plan unconstitutional because this retirement system wouldn't be actuarially sound. Another problem, he said, was that it would result in two people retiring at the same time with dramatically different benefits, depending on what year they enrolled. It also orphans the TRS, he said.
Status of pension bills before the Montana Legislature
Gazette State Bureau | Sunday, April 10, 2011
HELENA — Here is the status of the major bills before the 2011 Legislature dealing with public employee retirement:
House Bill 85, by Rep. Franke Wilmer, D-Bozeman, would require employers to make pension contributions for working retirees under certain public retirement systems. Status: Probably dead. Tabled in committee.
House Bill 86, by Wilmer, is a housekeeping bill to clean up some provisions of the Teachers Retirement System. Status: Signed into law by governor.
House Bill 116, by Rep. Pat Ingraham, R-Thompson Falls, would tighten actuarial controls to improve actuarial funding of the Teachers' Retirement System. Status: Signed into law by governor.
House Bill 122, by Rep. Sue Malek, D-Missoula, makes benefit and funding changes to the Public Employees Retirement System for newly hired employees. They include increasing the time to 60 months from the current 36 months to determine the highest average monthly compensation used to calculate retirement benefits. It also increases the normal retirement to age 65 from age 60 for new hires and raises the age of eligibility for early retirement for new hires to age 55 from age 50, with five years of membership service. It would increase employees' contributions' for new hires to 7.9 percent on July 1 from the current 6.9 percent and then raise them to 8.9 percent on July 1, 2012. The employers' contribution for all PERS employees, new and existing, would go to 8.17 percent on July 1 from the current 7.17 percent and then to 9.17 percent on July 1, 2012. Status: Before House, which must act on Senate amendments.
House Bill 134, by Rep. Carolyn Squires, D-Missoula, would revise benefits and funding for the Game Wardens' and Peace Officers' Retirement System. It would increase the time period for determining highest average monthly compensation for new hires to 60 months from the current 36 months. The employers' contribution for new and existing employees in the system would rise to 10 percent on July 1 from the current 9 percent and go to 11 percent in mid-2012. Status: Signed into law by governor.
House Bill 135, by Squires, would revise pensions and benefits for the Sheriffs' Retirement System. It would increase the period for determining highest average monthly compensation for new hires to 60 months from the current 36 months. It would increase employers' contribution for all employees, new and current, to 11.115 percent on July 1, up for the current 10.115 percent, and increase it to 12.115 percent in mid-2012. Status: Signed into law by governor.
House Bill 197, by Rep. Brian Hoven, R-Great Falls, was a proposed constitutional amendment to allow the Legislature to change public employee retirement plan contracts with members to make the plans actuarially sound. Status: Probably dead. Tabled in committee.
House Bill 608, by Rep. Wayne Stahl, R-Saco, would close all existing state public retirement plans and replace them with a new annuity benefit plan administered by the state. Status: Probably dead. Tabled in committee.
House Bill 632, by Rep. Janna Taylor, R-Dayton, would change the allocation of coal severance tax revenue — not the constitutional trust fund — and divert the general fund portion to public retirement accounts. It would direct more than $15 million a year, starting in 2014, to four pension funds. Status: Pending in Senate committee after passing House.
Senate Bill 54, by Sen. Joe Balyeat, R-Bozeman, would establish a hybrid tier for new hires in Teachers' Retirement System. Status: Passed both houses and on way to governor.
Senate Bill 138, by Sen. Llew Jones, R-Conrad, would clarify the funding of the Montana University System optional retirement plan. Status: Passed both houses and on way to governor.
Senate Bill 328, by Sen. Dave Lewis, R-Helena, to require new Public Employee Retirement System hires, upon the passage of the bill, to join a defined contribution plan instead of the current defined benefit plan. Status: Tabled by House committee.
[NOTE: We don't know why reporter Chuck Johnson didn't include HB 189 in this list. At one point, 189 passed House State Administration 17-1. Then after some inexplicable processing errors that delayed 2d reading in the House for nearly a month legislators gathered all the crash-and-burn government venom they could muster, tortured 189 with one atrocious amendment after another, and then murdered the bill. All bad.]
Sources: Information from Montana Public Employees' Retirement Administration, Montana Teachers' Retirement System, Montana Public Employees Association and MEA-MFT.
For a related comment, click here - http://www.greatfallstribune.com/article/20110410/OPINION/104100305/-1/NLETTER01/Baby-boomer-s-call-to-arms--Now-is-the-time-for-all-good-...?source=nletter-news