Thread: Retirement Changes
02-13-2010, 04:40 PM #1
Utah Committee OKs Dramatic Retirement Reforms
Saturday, Feb 13
SALT LAKE CITY (AP) - Three bills that would dramatically alter the state retirement system squeezed through a Utah Senate committee on Friday.
Lawmakers split 3-2 on each retirement measure proposed by Sen. Dan Liljenquist, R-Bountiful. His reforms would largely reinvent the state pension fund for new employees hired after a certain date. The bills now move on to the full Senate.
The economic meltdown in 2008 left many pension funds shortchanged. The crisis stripped Utah of $6.5 billion, and returns in 2009 did little to recover losses.
Senate Bill 63 would essentially replace the defined-benefit pension plan for public employees hired after July 1, 2011, with a scaled-down option. It would provide them with a choice between a hybrid retirement plan with reduced benefits or a 401(k) plan that allows them to contribute 8 percent of their salaries.
Senate Bill 94 would relieve employers of the requirement to add 1.5 percent of a public employee's salary into their defined-contribution plans.
And Senate Bill 43 would bar Utahns who retire and are rehired after July 1, 2010, from collecting a pension and a paycheck at the same time, a practice known as "double-dipping."
Liljenquist said his goal is to keep the system fit for the state's current and retired employees. The pension system would have to post double-digit returns for the next 20 years in order to return to better days, he said.
The proposals have drawn the ire of several of Utah's public employee unions, some of which testified against the bills at the hearing.
Kim Campbell, the president of the Utah Education Association, pleaded with the committee to avoid making drastic decisions on an issue impacting so many Utahns.
"Let's slow down and make sure we get it right," Campbell said. "It's not about spreadsheets, it's about people."
Ron Snell, who tracks pension fund legislation for the National Conference of State Legislatures, said Utah is in line with a nationwide trend that predates the financial crisis.
States were pushed over the edge by the economic collapse, but Snell says demographics have caused lawmakers to look at the issuesince 2005. In the years since, nearly 20 states have made significant changes in retirement benefits.
"People are living longer and that puts more stress" on the state, Snell said.Front line since 1983 and still going strong
02-19-2010, 08:41 PM #2
Utah Legislature: Pension changes pass first hurdleBy
SALT LAKE CITY A package of bills reshaping the state retirement system in light of a $6.5 billion shortfall passed its first hurdle in the Senate on Thursday, but not before some of the most intense debate this session.
The three bills, sponsored by Sen. Dan Liljenquist, R-Bountiful, all won preliminary approval. A final vote in the Senate is expected today.
"We are basically, for a very long time, cleaning up what happened in 2008," he said, a reference to the massive hit the Utah Retirement System took in that year's economic collapse.
He warned that the state is in danger of not being able to meet its pension obligations to current employees unless the retirement system is changed to reduce the state's obligations in the future.
Representatives of state and local workers, schoolteachers, police officers, firefighters and others covered under the system have been pushing for the changes to be delayed.
Thursday, several Democratic senators, along with Republican Sen. Jon Greiner, also questioned whether such drastic action is needed now.
"Why are we trying to rush through the most significant event to our employees," said Greiner, the Ogden police chief who retired and then was rehired.
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He was especially concerned about SB43, the bill that would prevent retirees rehired by the government from collecting both a pension and a paycheck, a practice known as "double-dipping."
Liljenquist pointed to a legislative audit released late last year that showed "double-dipping" could cost the state nearly $900 million over a decade. "It's costing us far more than expected," he said, money the state can't afford on top of the shortfall.
Senators voted 20-8 to move the bill forward. Greiner, who by avoiding an earlier committee vote had allowed the bills to be passed out to the full Senate, joined Democrats in opposing SB43.
Greiner also wondered whether the state could make up the shortfall by banking on big investment returns, noting the system that serves state and local government employees earned some 13 percent last year.
Liljenquist said it would take $400 million a year for 25 years double the state's current retirement contribution to cover the shortfall if benefits aren't reduced. Even larger-than-anticipated returns wouldn't be enough, he said.
His SB63 would reduce the state's retirement contribution by about half for new employees hired after July 1, 2011, as well as increase the number of years it takes to earn a full pension. Should another drastic drop occur in investments, workers in the new system might have to contribute toward their retirement, too.
Senate Minority Assistant Whip Karen Mayne, D-West Valley, said she is a "poster girl" for the current pension system. She said without the benefits she's received, she wouldn't have been able to follow her late husband, Ed Mayne, into legislative service.
"This is life-changing," Mayne said of cutting future pension benefits. "I would hope we would rethink this."
Sen. Howard Stephenson, R-Draper, said the current system puts taxpayers at risk. "It's very clear to me we must stop the hemorrhage," Stephenson said. "We must stop the huge gamble."
SB63 passed by the same margin, 20-8. There was virtually no debate on the final bill dealt with Thursday, SB94, which eliminates contributions to 401(k) retirement funds.
The debate took place the same day a new national study was released detailing a $1 trillion gap in 2008 between the amount states had set aside to pay for employee retirement benefits and the actual cost.
Utah was labeled a "solid performer" in the Pew Center on the States report, "The Trillion Dollar Gap: Unfunded State Retirement Systems and the Road to Reform."
But while Utah is said to be managing its long-term pension liability well, the report warns too little is being set aside to cover future retiree health care and other benefits.
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Liljenquist said lawmakers have already made adjustments in past sessions to ensure those benefits are funded. He welcomed the new report.
"I think the Pew report validates what I've been saying for the last six months, that we've got a problem," he said. One note of caution in the report, Liljenquist said, was the system's assumption that its investments would earn 7.75 percent annually over time.
"We're got an even bigger problem if we don't get those returns," the senator acknowledged.
The report "shows why states must take strong action now or taxpayers will suffer later," according to the center's findings. "To a significant degree, the $1 trillion reflects states' own policy choices and lack of discipline."Front line since 1983 and still going strong
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