texas association of public employee retirement systems ... · page 2 texpers outlook april 2014...

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April 2014

1225 North Loop West, Ste. 909Houston, Texas 77008Phone: (713) 622-8018Fax: (713) [email protected]

BOARD OF DIRECTORS

PresidentPAUL R. BROWNBig Spring Firemen’s Relief & Retirement Fund

First Vice PresidentSHERRY MOSEHouston Municipal Employees Pension System

Second Vice PresidentTYLER C. GROSSMANEl Paso Fire & Police Pension Fund

SecretaryJOHN D. JENKINSDallas Employees’ Retirement Fund

TreasurerEYNA CANALES-ZARATECity of Austin Employees’ Retirement System

Board Member PETE MORINAustin Police Retirement System

Board Member ANDY BARBOZACorpus Christi Firefighters’ Retirement System

Board Member DENISE CRANDONDallas Area Rapid Transit Retirement Plan and Trust

Board Member JOSE CAVAZOSDallas Area Rapid Transit Retirement Plan and Trust

Board Member LARRY A. REEDSan Antonio Fire & Police Pension Fund

Board Member JIM SMITHSan Antonio Fire & Police Pension Fund

ASSOCIATE ADVISORS

EDMUND M. GRANTAllianceBernsteinNICHOLAS STANOJEVBNY Mellon DELIA M. ROGESInvescoLINDA J. JORDANMesirow FinancialJASON WIDENEROFI Institutional Asset ManagementDAVID M. SCHILLERState Street Global AdvisorsKEVIN FETZERWilliam Blair & CompanyRICHARD C. BADGERWunderlich SecuritiesSTAFF

Executive DirectorMAX PATTERSONContributing EditorMATT AUKOFER

TEXPERS OUTLOOKIssues ImpactIng publIc pensIon Funds

Texas Association of Public Employee Retirement Systems

Continued on page 2

New Guidance Helps State and Local Governments Implement GASB Pension Accounting Standards Several entities have published guidance to help public pension plan sponsors and other stakeholders understand and apply the revised pension accounting and financial reporting standards adopted by the Governmental Accounting Standards Board (GASB) in June 2012. The first of these entities is GASB itself, which released a free “toolkit” to help preparers, auditors and users of state and local government financial reports better understand and implement the pension standards. The toolkit covers GASB Statement 68, Accounting and Financial Reporting for Pensions, which revised existing guidance for the employees of state and local governmental employers. It complements a separate toolkit that GASB released in November 2013 for pension plans implementing GASB Statement 67, Financial Reporting for Pension Plans. Meanwhile, the actuarial firm Milliman has released a paper exploring the relationship between the actuarial valuation date, the measurement date and the reporting date – all critical dates that should be strategically determined in the early planning stages of implementation of GASB 67 and 68. “Thoughtful planning now could help prevent a time crunch when under financial reporting deadlines, by ensuring that necessary items, such as actuarial calculations and new disclosure calculations, and be completed and prepared in a timely fashion,” Milliman author Richard Gordon explained in Milliman’s March 2014 issue of Periscope. Schneider Downs & Co., Inc., an accounting, tax and business advisory firm, also provides an analysis of GASB 68. It says one reason GASB 68 is controversial is because the unfunded pension liability now will appear on the face of the financial statements.

In this issue:New Guidance Helps State and Local Governments Implement GASB ... pg. 1-2Effort Exposes DB Money Managers Who Support Eliminating DB Funds ... pg. 2Money Manager for the Tampa Police and Firefighters Succeeds... pg. 3GFOA Approves 14 ‘Best Practices’ for State and Local Governments ... pg. 3Supplemental Retirement Plans Offered by City and County Governments ... pg. 3Actuaries Study the Implications of Raising Social Security Retirement Age ... pg. 4Aging Population Presents Challenges for Retirement Savings, Research Finds ... pg. 4State Pension Plan Funding Ratios Increase to 75% in 2013 ... pg. 5Public Pension Funds Are Not the Burden That Their Critics Claim ... pg. 5Shift from DB to DC Pension Plans Having Biggest Impact on Women, GAO Finds ... pg. 6NIRS ‘Scorecard’ Provides State-by-State Analysis of Financial Security for Retirees ... pg. 6SEC Encourages Issuers and Underwriters of Municipal Securities ... pg. 7New SEC Rules Apply to ‘Systemically Important’ Clearing Agencies ... pg. 7SEC, FINRA to Hold Regional Compliance Outreach Programs for Broker-Dealers ... pg. 7Retirement Confidence Highest Among Wealthiest Americans ... pg. 8NASRA Analyzes Public Pension Fund COLA Types and Features ... pg. 8

TEXPERS Outlook April 2014

Continued from page 1

“And the liability may be substantial,” the firm says. “As the number of government employees continues to shrink, so do the contributions.” In addition, the Governmental Audit Quality Center of the American Institute of Certified Public Accountants (AICPA) posted an alert regarding financial auditing issues related to the implementation of both GASB Statements 67 and 68. The issues are discussed in two white papers published by the AICPA’s State and Local Government Expert Panel (SLGEP), the links to which can be found below. The Government Finance Officers Association (GFOA) also is getting in on the act – not by providing guidance, but by calling for the delayed implementation of GASB 68. On Feb. 28, the GFOA’s executive board approved a resolution calling for a delay “for as long as necessary to permit the implementation of pending authoritative auditing guidance so as to allow auditors to obtain the information necessary to support the reliability of pension related amounts in employer financial statements.” On the Web at: • http://www.gasb.org/cs/ContentServer?c=

GASBContent_C&pagename=GASB%2FGASBContent_C%2FGASBNewsPage&cid=1176163888070,

• http://www.milliman.com/uploadedFiles/insight/Periodicals/peri/pdfs/gasb-67-68-valuation-date.pdf,

• http://www.schneiderdowns.com/gasb-68-comprehensive-state-and-local,

• h t t p : / / w w w. a i c p a . o r g / I n t e r e s t A r e a s /Governmen ta lAud i tQua l i ty /Resources /gasbma t t e r s /Downloadab leDocumen t s /AICPASLGEP_CS_ER_Reporting_Whitepaper.pdf,

• h t t p : / / w w w. a i c p a . o r g / i n t e r e s t a r e a s /governmentalauditquality/resources/gasbmatters/downloadabledocuments/aicpaslgep_cs_census_data_whitepaper.pdf, and

• ht tp : / /g foa .org / index .php?opt ion=com_content&task=view&id=2987.

Effort Exposes DB Money Managers Who Support Eliminating DB Funds The American Federation of Teachers (AFT) is trying to shed light on money managers who have a serious conflict of interest: they manage defined benefit (DB) pension plans while simultaneously assisting or supporting organizations that are trying to diminish or eliminate these very same plans. The teachers’ union recently published the second edition of its report, “Ranking Asset Managers: A Retirement Security Report On Money Managers For Pension Fund Trustees,” which documents asset fund management companies that are working with DB funds while also supporting third-party organizations that are working against DB pensions. Some of the updates in the latest edition of the report include the addition of asset managers who are participating in the “Illinois Is Broke” campaign, which has been attacking Chicago’s public employees’ DB plans. The report makes a special mention of Illinois Republican gubernatorial candidate Bruce Rauner, who is the retired chairman of GTCR, a Chicago-based private equity firm. GTCR manages billions in public employee pension funds and Rauner earned millions of dollars as an asset manager of DB plans. He is now seeking to freeze the state’s DB plan and replace it with a defined contribution (DC) plan. On the other end of the spectrum, AFT updated its report to remove the consulting and brokerage firm Aon from the conflict-of-interest list based on the company’s history of strong support for DB pension plans and assurances of continued support in the future. Aon joins the ranks of several companies that have been removed from the list, having eliminated the conflict of interest in their work, said AFT President Randi Weingarten. The purpose of the report is to make transparent the role that certain financial interests play in seeking to eliminate pensions or dramatically cut the benefits they provide. AFT analyzes publicly available materials to track connections between fund managers and organizations that want to eliminate or reduce traditional DB plans. The report states that pension fund trustees have options when it comes to avoiding the selection of investment fund managers whose views place them at odds with the economic interests of the fund participants and beneficiaries. On the Web at: http://www.aft.org/pdfs/press/RankingAssetManagers_030514.pdf.

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April 2014 TEXPERS Outlook

GFOA Approves 14 ‘Best Practices’ for State and Local Governments The executive board of the Government Finance Officers Association (GFOA) has approved 14 best practices – four new and 10 revised – on topics ranging from managing health-care costs to engaging and managing outside professionals in bond transactions. The GFOA regularly develops best practices to serve as guidance on selected topics for state and local governments. It also develops advisories to caution against certain practices. The four new best practices are: • Implementing OMB Uniform Guidance –

Provides recommendations on steps that state

Money Manager for the Tampa Police and Firefighters Succeeds with Unconventional Approach The New York Times has published a profile of the money manager for the Tampa firefighters and police officers pension fund, Harold J. Bowen III, president of Bowen, Hanes, in Atlanta, who utilizes an unconventional approach to investing and who is seeing great success. The article points out that, with an average annualized return of 9.88 percent over the past 20 years, the Tampa fund is the envy of many state and local governments. However, Bowen pretty much breaks all the conventional rules of fund management. The fund has no hedge fund or private equity investments. It also doesn’t own any index or mutual funds. Bowen, who describes his approach as “plain vanilla,” relies on old-fashioned “stock-picking” in the active, rather than passive, sense of the word. He searches for “blue chip companies of the future” and keeps to a relatively concentrated portfolio of 70-80 stocks. It is a buy-and-hold, value-oriented approach that is rare among public pension fund managers today. Bowen’s firm also charges low fees – a fraction of what other money management firms charge. As a result, Tampa’s public retirees are seeing the benefits. According to the article, after 30 years of service, the beneficiaries are paid a pension that amounts to 94.5 percent of their average compensation for the highest three years of their last 10 years on the job. On average, that amounts to just over $40,000 a year for nondisabled ret i rees . The fund has 3 ,326 beneficiar ies . On the Web at: http://www.nytimes.com/2014/03/22/business/a-pension-fund-invests-against-the-rules-and-wins.html?_r=0.

and local governments should take to ensure that they fully comply with the Office of Management and Budget’s (OMB) final guidance on Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

• Indirect Cost Allocations – Encourages governments to allocate their indirect costs, and provides considerations for governments to keep in mind in connection with indirect cost allocation.

• Actuarial Audits – Provides guidance to public pension plan fiduciaries on the types of actuarial audits, and encourages fiduciaries to provide for actuarial audits at least once every five years.

• Merchant Card Acceptance Internal Controls – Recommends that state and local governments establish internal controls for merchant card acceptance programs and provides factors to consider when establishing these controls.

On the Web at: http://gfoa.org/index.php?option=com_content&task=view&id=2963.

Supplemental Retirement Plans Offered by City and County Governments Grow More Prevalent The Center for State & Local Government Excellence (SLGE) examines the structure and terms of supplemental retirement savings plans offered by 20 cities and counties around the country. It finds that 15 of the local government employers offer only one type of plan; all 20 local government employers in the study offer at least one 457 savings plan and some also offer a 401(k) plan. The importance of boosting savings through supplemental retirement plans has grown as many local governments have reduced the level of pension benefits they provide to new hires, SLGE says in the issue brief. The plans differ in the number of investment options. Most plans allow loans, while only four of the employers match contributions. Employees have access to information about the plans from local employer, vendor, or state websites, but high-quality information is not always available, SLGE found. While there are many similarities in the supplemental retirement saving plan offerings of the 20 local employers, SLGE highlighted some of the main differences across the plans that might be important for determining participation and contribution rates. Future research will explore how the supplemental plan offerings are related to coverage by Social Security, the generosity and parameters of the defined benefit plan, and whether the governments also extend health insurance to retirees. On the Web at: http://slge.org/wp-content/uploads/2014/03/Supplemental_Retirement_Plans_14-477.pdf.


Actuaries Study the Implications of Raising Social Security Retirement Age The American Academy of Actuaries is exploring the actuarial implications of increasing Social Security’s full retirement age beyond age 67. In a new report, “Essential Elements: Raising Social Security’s Retirement Age,” the association makes the case that there are five advantages to increasing Social Security’s retirement age: 1) to strengthen Social Security; 2) to compensate for increased longevity; 3) to preserve the current benefit formula; 4) to increase labor force participation; and 5) to preserve intergenerational equity. The report suggests that, since increased longevity is one cause of Social Security’s financial hardship, part of the solution may be raising the full retirement age. However, it also notes several disadvantages, including: • Low-income workers could face disproportionate benefit cuts as a result of the higher retirement age; and• Workers with physically demanding jobs may not be able to work until the higher retirement age. The report suggests mitigating these effects by changing disability rules in order to benefit certain workers who are unable to perform their jobs after reaching a specific age. On the Web at: http://www.actuary.org/files/ee_soc-sec-retirement-age_02-26-14.pdf.

Aging Population Presents Challenges for Retirement Savings, Research Finds Longer life expectancy in the United States will create many new challenges for retirement savings, according to a new paper published by the National Bureau of Economic Research (NBER). The paper provides a brief overview of falling mortality rates at older ages and highlights the implications of this for lifecycle planning. It then explores the macroeconomic consequences of population aging, drawing heavily on the findings of a 2012 study by the National Research Council. Elderly individuals have widely varying sources of income, according to the paper, “Retirement Security in an Aging Society,” by James M. Poterba. The author finds large differences between the upper and lower strata of the income distribution in their retirement finances. He then documents the changes over the last three decades in the employer-provided pension system and how that has affected retirement preparation. Poterba then explores the relationship between an individual’s saving rate while working, career length, rates of return, and the income replacement rate in retirement. The paper reports calculations that underscore the challenges of providing for lengthy retirement periods in an economic environment that offers low long-term rates of return. But it describes strategies for promoting savings, including recent findings on automatic enrollment and other approaches derived from behavioral economics. “The trend from private sector defined benefit to defined contribution plans has shifted a greater share of the responsibility for retirement security to individuals, and made that security more dependent on choices they make,” the paper states. “A significant subset of the population is unlikely to be able to sustain their standard of living in retirement without higher pre-retirement saving.” On the Web at: http://www.nber.org/papers/w19930.

The 2013 Report on the Asset Allocation and Investment Performance of Texas Public

Employee Retirement Systems is now available!

Visit the TEXPERS web site to download your copy today. Click on Newsroom and then TEXPERS Studies and Research.

TEXPERS OutlookApril 2014

State Pension Plan Funding Ratios Increase to 75% in 2013 U.S. state retirement systems were better funded and saw a surge in assets in 2013, according to new data released by consulting firm Wilshire Associates. Wilshire estimated that the 134 state retirement systems studied had enough assets to cover 75 percent of their obligations in the year ended June 30, 2013, up from 72 percent in 2012. At the same time, however, 96 percent of those plans were considered underfunded, with an average funding ratio of 70 percent, the firm said. For years, many states have shortchanged their public pension systems, putting in far less than actuaries suggested was necessary to maintain full funding, and then cut allocations further during the 2007-09 recession as revenues plummeted. The financial crisis sent the plans’ investments, which provide two-thirds of revenues, into a downward spiral. Across the U.S., battles have erupted over whether states have enough money to pay promised benefits, especially now that the first wave of the baby boom population is retiring. The fights are especially heated over assumed rates of return, with many conservatives saying the current expected rates are too high to attain. According to Wilshire, state pension portfolios have, on average, a 65% allocation to equities or stocks – including real estate and private equity – and a 35 percent allocation to fixed income and other non-equity assets. On the Web at: • http://www.pionline.com/article/20140305/ONLINE/140309950/wilshire-state-pension-plans-funding-

ratios-increase-to-75-in-2013, • http://www.bloomberg.com/news/2014-03-05/state-pension-funding-reaches-75-wilshire-says-in-study.

html, and • http://www.plansponsor.com/State_DB_Plans_Better_Funded_in_2013.aspx.

Public Pension Funds Are Not the Burden That Their Critics Claim A recent article by Kevin G. Hall of McClatchy Newspapers discusses the controversy over public pension funding – and the perception among detractors that benefits for public employees are too high – and finds that there is “simply no evidence that state pensions are the current burden to public finances that their critics claim.” Pension contributions from state and local employers “aren’t blowing up budgets,” Hall writes. They amount to just 2.9 percent of state spending, on average, he says, citing the National Association of State Retirement Administrators. Hall adds that, while a direct comparison is difficult to make, state and local pension contributions approximate the burden shouldered by private companies. He quotes the nonpartisan Employee Benefit Research Institute, which estimates that retirement funding for private employers amounts to about 3.5 percent of employee compensation. Hall also disputes the notion that state and local government pension funds are “broke,” as many critics claim. “They’re underfunded, in large measure because – like the investments held in 401(k) plans by American private-sector employees – they sunk along with the entire stock market during the Great Recession of 2007-2009,” he writes. “And like 401(k) plans, the investments made by public-sector pension plans are increasingly on firmer footing as the rising tide on Wall Street lifts all boats.” On the Web at: http://www.mcclatchydc.com/2011/03/06/109649/why-employee-pensions-arent-bankrupting.html.

Send contributions to: 1225 North Loop West, #909 Houston, TX 77008www.texansr.org

Support TSR’s efforts on your behalf. Texas public employees

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NIRS ‘Scorecard’ Provides State-by-State Analysis of Financial Security for Retirees The National Institute on Retirement Security (NIRS) has released an analysis showing that nearly every state is falling short in retirement readiness. In the analysis, “The Financial Security Scorecard: A State-by-State Analysis of Economic Pressures Facing Future Retirees,” researchers gauge the relative performance of the 50 states and the District of Columbia in three key areas: anticipated retirement income; major retirement costs such as housing and healthcare; and labor market conditions for older workers. The research found that Texas ranks as among the best states in terms of providing overall financial security for future retirees. Others, such as California, did not fare as well. In fact, California was one of the three lowest ranked states on an overall basis that considered retirement income, retiree costs and labor market conditions for older adults. The California Public Employees’ Retirement System (CalPERS) responded to the report by saying the challenges that the report highlights “are complex and interweave state and national governmental issues with private sector issues.” At the same time, the report can help set the stage for “necessary and very difficult discussions about the economic stability of retirees, now and in the near future.” CalPERS pointed out that the state took an important step to address these issues with the establishment of the California Secure Choice Retirement Savings Program, which if implemented would provide a voluntary retirement savings plan for an estimated 6.3 million state workers. On the Web at: http://www.nirsonline.org/index.php?option=content&task=view&id=830.

Shift from DB to DC Pension Plans Having Biggest Impact on Women, GAO Finds The shift away from defined benefit (DB) pension plans to defined contribution (DC) plans has affected the types of retirement benefits available to most households, but has had the most negative impact on women, particularly those who are not married, according to the Government Accountability Office (GAO), the investigative arm of Congress. Since the 1960s, the percentage of unmarried, single-parent families has risen dramatically, especially among low-income, less-educated individuals and some minorities, according to the report, which was based on testimony by Barbara Bovbjerg, the GAO’s managing director of education, workforce, and income security, before the U.S. Senate Special Committee on Aging. At the same time, the number of women in the labor force has increased. Both of these events have affected the types of Social Security benefits households receive, with fewer women receiving spousal benefits today than in

the past. T h e shift from DB to DC also has i n c r e a s e d f i n a n c i a l vulnerability for some of these same groups because DC

plans offer fewer spousal protections, Bovbjerg, said. The GAO found that 11 percent of women and 6.6 percent of men over the age of 65 were living in poverty in 2012. In addition, the percentage gap between the genders increases as the population ages. Those hit the hardest were separated women, with 35.4 percent living in poverty, followed by women who never married, with 23.2 percent living in poverty; divorced women, with 17.1 percent of them living in poverty; and widowed women, with 14.5 percent living in poverty. Race also plays a role, with 8.6 percent of white women living in poverty compared to 21.3 percent of black women, 11.9 percent of Asian women and 21.8 percent of Hispanic women. Social Security is now the most common type of income for retirees. Social Security retirement benefits are available not only to those who qualify based on their own work history, but also to spouses, widows/widowers, and in some cases former spouses of workers who qualify.

“[T]he transition from DB to DC plans has increased the vulnerability of some spouses due to differences in the federal requirements for spousal protections between these two types of retirement plans,” Bovbjerg said in the report. “For DB plans, spousal consent is required if the participant wishes to waive the survivor annuity for his or her spouse. In contrast, for DC plans, spousal consent is not required for the participant to withdraw funds from the account – either before or at retirement – and DC plans do not generally offer annuities at all, including those with a survivor benefit. While this may not be a concern among many couples, it is a concern for some, especially those who depend on their spouse for income.” On the Web at: http://www.gao.gov/assets/670/661377.pdf.

April 2014 SEC Encourages Issuers and Underwriters of Municipal Securities to ‘Self-Report’ Violations The Securities and Exchange Commission (SEC) announced a new initiative to encourage issuers and underwriters of municipal securities to self-report certain violations of the federal securities laws rather than wait for their violations to be detected. Under the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, the SEC’s Enforcement Division will recommend standardized, favorable settlement terms to municipal issuers and underwriters who self-report that they have made inaccurate statements in bond offerings about their prior compliance with continuing disclosure obligations. SEC rules generally prohibit underwriters from purchasing or selling municipal securities unless the issuer has committed to providing continuing disclosure regarding the security and issuer, including information about its financial condition and operating data. They also generally require that municipal bond offering documents contain a description of any instances in the previous five years in which the issuer failed to comply with any previous commitment to provide such continuing disclosure. The initiative is designed to promote improved compliance by encouraging responsible behavior by market participants who have failed to meet their obligations in the past. On the Web at: http://www.sec.g o v / d i v i s i o n s / e n f o r c e / m u n i c i p a l i t i e s -continuing-disclosure-cooperation-initiative.shtml and http://www.sec.gov/divisions/enforce/mcdc-initiative-questionnaire.pdf.

New SEC Rules Apply to ‘Systemically Important’ Clearing Agencies The Securities and Exchange Commission (SEC) will be proposing new rules to enhance the oversight of clearing agencies that are deemed to be “systemically important” or that are involved in complex transactions, such as security-based swaps. Such agencies “are a backbone of the U.S. financial markets,” said SEC Chair Mary Jo White. Securities clearing agencies generally acts as middlemen between the parties to a securities transaction, performing a range of services important for the effective operation of the securities markets. These services can include ensuring that funds and securities are correctly transferred between parties and, in some cases, assuming the risks of a party defaulting on a transaction by acting as a “central counterparty.”

The Dodd-Frank Wall Street reform act called for an enhanced regulatory framework for certain clearing agencies. The SEC’s proposal would apply to SEC-registered clearing agencies that have been designated as “systemically important” by the Financial Stability Oversight Council or that take part in more complex transactions. Clearing agencies covered by the proposed rules would be subject to new requirements regarding

their financial risk management, operations, governance, and disclosures to market participants and the public. The proposal also would establish procedures for the Commission to apply the new requirements to additional clearing agencies. The public will have 60 days to comment on the proposed rules from the date they were published in the Federal Register.

On the Web at: http://www.sec.gov / ru l e s /p roposed /2014 /34-71699 .pdf .

SEC, FINRA to Hold Regional Compliance Outreach Programs for Broker-Dealers

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are again holding regional compliance outreach programs for broker-dealers, which will provide professionals at broker-dealer firms with a forum to discuss risk management, regulatory issues and compliance practices with federal regulators. The programs will take place in Denver, Los Angeles, Chicago, Miami, Philadelphia, and New York, beginning in the spring. The regional programs encourage interactions between staff from the SEC and FINRA and personnel from registered broker-dealer firms. They give federal regulators an opportunity to listen to the broker-dealer firms regarding their day-to-day compliance initiatives. There is no cost to attend the regional programs. Registration is open to all risk, audit, legal and compliance professionals employed by broker-dealers, with limited seating available on a first-come, first-served basis. On the Web at: http://www.sec.gov/info/complianceoutreach-bd.htm and http://www.finra.org/Industry/Education/ConferencesEvents/P037195.

TEXPERS Outlook April 2014Retirement Confidence Highest Among Wealthiest Americans Americans who owned stocks in 2013 are feeling better about their retirement prospects than they did just a few years ago, according to the 2014 Retirement Confidence Survey, published by the nonprofit Employee Benefit Research Institute (EBRI). Other members of the population, however, were not so confident. The rise in confidence in 2013 was the first increase since sentiment plunged following the Great Recession of 2008-2009. But the survey shows that the optimism is due almost entirely to the stock market’s bull run over the past two years. Moreover, the rising confidence is concentrated among wealthier savers, who have the most significant equity accumulations. The percentage of workers confident of having sufficient money for retirement rose from record post-crash lows. Eighteen percent were “very” confident, up five percentage points from 2009, though still well below the historic high of 27 percent in 2007. Thirty-seven percent are “somewhat confident.” But 24 percent of workers said they were “not at all confident,” still much higher than the 10 percent no-confidence reading of 2007. Most disturbing, the survey found no progress among a large segment of workers in accumulating retirement savings. Thirty-six percent of all workers say they have less than $1,000 saved for retirement, and 68 percent of workers earning $35,000 or less have saved less than $1,000. The survey also found that 58 percent of workers (and 44 percent of retirees) reported “having a problem with debt.” Twenty-four percent of workers (and 17 percent of retirees) say their debt levels are higher now than five years ago. The wealthiest households told a different story. Thirty-six percent of working households with annual income over $75,000 were “very confident” about retirement, compared with 11 percent of households with income of $35,000 to $74,000, and 7 percent with incomes below $35,000. Meanwhile, access to a workplace retirement account continued to be a key problem. EBRI found a strong correlation between confidence and participation in a retirement plan, whether a traditional defined-benefit (DB) pension, a 401(k) plan or an individual retirement account. Workers with plans were more than twice as likely to be “very confident” about their retirement prospects (24 percent versus 9 percent). EBRI did not break out confidence levels of those who have traditional DB pensions, but separate research shows even higher

confidence levels among workers who know they will have guaranteed income from a pension. A 2012 retirement confidence survey of state and local workers by the Center for State and Local Government Excellence and the TIAA-CREF Institute found that 73 percent of workers are very or somewhat confident that they will have enough money for a comfortable retirement. That compares with a combined 55 percent of all workers who say they are very or somewhat confident in the EBRI survey. On the Web at: http://www.ebri.org/surveys/rcs.

NASRA Analyzes Public Pension Fund COLA Types and Features Cost-of-living adjustments (COLAs), which are provided in some form by most state and local government pension plans, exist in many shapes and sizes. The National Association of State Retirement Administrators (NASRA) puts them in perspective in a new issue brief that identifies the various types of COLAs and their features. Public pension COLAs have been under the microscope as of late, as many states look to make adjustments to the cost of benefits amid challenging fiscal conditions and the current low inflationary environment. COLAs add both value and costs to pension benefits, and in many cases, the way COLAs are constructed is determined or affected by other factors, such as inflation or the condition of the pension plan. NASRA discusses the purpose of COLAs, the different types of COLAs as provided by government pension plans, and an overview of recent state changes to COLA provisions. Social Security beneficiaries are provided an annual COLA to maintain recipients’ purchasing power. Similarly, most state and local governments provide an inflation adjustment to their retiree pension benefits, NASRA found. This benefit is particularly important for public employees – including nearly half of public school teachers and most public safety workers – who do not participate in Social Security. Unlike Social Security, however, state and local retirement systems typically prefund the cost of a COLA over the working life of an employee to be distributed annually over the course of his or her retired lifetime. The way in which public pension COLAs are calculated and approved varies considerably. NASRA details the COLA types and features, including “automatic vs. ad hoc,” simple vs. compound,” “inflation-based,” “performance-based,” “delayed-onset or minimum age,” and more. On the Web at: http://www.nasra.org/files/Issue%20Briefs/NASRACOLA%20Brief.pdf.

UPCOMING TEXPERS

CONFERENCESSummer educational Forum

Omni GalleriaHouston, Texas

Sun, August 10 - Tues, August 12, 2014Sat, August 9 - Trustee Training

twenty-Sixth annual conFerenceSheraton AustinAustin, Texas

Sun, March 29 - Wed, April 1, 2015

Summer educational ForumGrand Hyatt

San Antonio, TexasSun, August 16 - Tues, August 18, 2015

twenty-Seventh annual conFerenceSheraton Dallas

Dallas, TexasSun, April 3 - Wed, April 6, 2016


San Antonio, TexasSun, August 14 – Wed, August 16, 2016

twenty-eighth annual conFerenceHilton AustinAustin, Texas

Sun., April 9 - Wed, April 12, 2017



twenty-ninth annual conFerenceSouth Padre Island Convention Centre

South Padre Island, TexasSun, April 15 - Wed, April 18, 2018



thirtieth annual conFerenceHilton AustinAustin, Texas

Sun, April 7 - Wed April 10, 2019

April 2014

Summer Educational Forum August 10 - August 12, 2014

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Watch for sessions on:• The new mandated training rules

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texas association of public employee retirement systems ... · page 2 texpers outlook april 2014...

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