Teamsters want audit of Nashville pension fund

The Teamsters union is preparing legislation that would require regular performance audits of the $1.7 billion Nasvhille Metro pension fund.

City Paper reports:

Jesse Case, coordinator with the Teamsters Law Enforcement League, said public employee pension plans need to be transparent.

“Even if there is nothing wrong with the plan, Metro needs to have a transparent policy in order to avoid any perception of problems,” Case said. “So there needs to be a Metro ordinance passed that compels periodic audits of Metro’s retirement fund. Right now the fund lacks checks and balances.”

The Teamsters government affairs department is currently working on possible legislation, and Case said the Teamsters will contact Metro Council members after the upcoming representation election Feb. 8.

San Diego pension board will not pay legal fees

Two former officials of the San Diego public employees' pension system cannot rely on the pension board to pay their legal fees. The Union-Tribune reports:

Former system administrator Lawrence Grissom and former general counsel Loraine Chapin face federal charges stemming from their roles in a 2002 deal that linked employee benefits to a proposal to continue to underfund the pension system. The practice began in 1996.

Though proposals to offer the indemnity attracted a majority vote – 5-2, with one abstention – they failed because seven votes are needed for the board's approval. Eight of the board's nine members were present; four seats are vacant.

Board members debated the issue for more than an hour, after hearing from attorneys for Grissom and Chapin, who criticized the federal prosecutors' case, and City Attorney Michael Aguirre, who has opposed using public funds to pay the legal fees of those facing criminal charges.

Accounting change could affect govt. retiree benefits

A change in accounting procedures will force state and local governments to calculate the actual and projected costs of health benefits for their retirees. The rule change by the Government Accounting Standards Board (GASB) takes effect at the end of this year.

The Washington Post reports that GASB rules do not carry the weight of law, but are considered an important measure of financial health by Wall Street analysts and bond rating agencies.

That means the rule is likely to have far-reaching consequences, finance experts and local officials say. Governments, school boards and other public bodies throughout the country will be compelled to report what they owe retirees for health care over the next 30 years -- and to begin setting aside additional millions of dollars to pay for it.

It will take two to three years for the full effects of GASB 45, as the rule is known, to play out. But officials say it could lead to reduced benefits for retirees. Governments that don't have a plan for fully funding their obligations could have their bonds downgraded, limiting their ability to borrow at favorable rates and costing taxpayers millions in additional interest payments for new schools, roads and other capital improvements.

"It's a big deal, and it will have a big impact on our financial statements," said Gail Francis, deputy finance director for Prince George's County.

Parry Young, public finance director for Standard & Poor's Corp., said many governments will be able to absorb the effects of GASB 45 with relative ease. Some, he warned, especially those providing extensive health benefits, will face "painful decisions," forced to choose between funding critical services now and investing in needs that will have to be met decades down the road.

An official with the American Federation of State, County and Municipal Employees (AFSCME) says state and local governments will likely feel the pressure to reduce retiree health benefits as a means of keeping the projected costs from affecting their bond ratings.

Voice of America: Pensions an endangered species

VOA reports on the trend among private-sector employers of abandoning traditional pension benefits.

The number of Americans over the age of 65 is expected to double between now and 2030. This next generation of retirees will be the healthiest, best educated, and most affluent in American history. But many of them will not have a retirement benefit their parents' generation fought hard to get.

It is something known as a defined-benefit plan, or "pension." Retired workers who have a pension continue to be paid a certain percentage of their highest annual salary - usually anywhere from one to three percent - multiplied by the number of years they worked for the company.

***[Olivia Mitchell, a professor at the University of Pennsylvania's Wharton School of Business] says she believes in the future, more and more employers are going to be abandoning defined-benefit plans in favor of defined-contribution plans. She says the one exception to this rule, though, could be the public-service sector. She says local, state, and federal government employees do not tend to change jobs quite as frequently as other American workers do - which is why public transportation workers in New York City recently went on strike in a bid to preserve their defined-benefit plans.

New Jersey pension system invests in hedge funds

Bloomberg reports:

New Jersey's state-employee pension fund for the first time will put money into hedge funds, the state's top investment official said.

The fund also plans to hire advisers to try to double or triple its investment in emerging markets, William Clark, head of the state Division of Investment, said this week.

State documents show that the pension fund will give a total of $300 million to four hedge-fund firms - Archipelago Partners L.P., AG Super Fund L.P., BGI Multi-Strategy Fund, and OZ Domestic Partners.

New Jersey's $72 billion public pension fund, the eighth-largest in the United States, invested only in stocks and bonds until last year. The fund's policymaking board then committed to putting at least $9 billion into private-equity, real estate and hedge funds.

The changes were made as part of efforts to improve returns and offset a deficit that investment board chairman Orin Kramer estimates at more than $30 billion.

Hedge funds use sophisticated investment strategies to try to wring higher, or at least steadier, profit than traditional investments, such as stocks and bonds.

New York transit union leader: New contract offer is unacceptable

The president of the New York Transit Workers' Union says the city's latest contract offer, which would increase pension and health insurance contributions from employees, is unacceptable.

Asked whether the union's leadership would put the proposal to a vote, [Roger] Toussaint said, "No, we downright reject it," the transcript said.

According to the newspaper, the contract terms include a requirement that workers begin contributing 1.5 percent of their wages toward health insurance premiums, which is an item objectionable to union members.

When asked why his own union members reject a contract that he had negotiated, Toussaint blamed what he called a "right-wing conspiracy" by dissident union leaders who are gunning for his job.

Convicted Indiana officials could lose pensions

A state senate committee in Indiana has approved a bill that would strip pension benefits from public officials convicted on corruption charges.

Senate Bill 322 would allow the Public Employees Retirement Fund board to eliminate the pensions of convicted felons.

It has been a high profile source of consternation in Northwest Indiana, where such high-profile convicted felons as former sheriff Rudy Bartolome and former County Councilman Troy Montgomery remain eligible for the state pensions, even after pleading guilty to accepting bribes.

“If a person is going to steal from the public, then the public should not have to pay their pension,” said Sen. Karen Tallian, D-Ogden Dunes.

She was a co-sponsor, along with Sen. Earline Rogers, D-Gary, of a bill by Sen. Dennis Kruse, R-Auburn. They met with Gov. Mitch Daniels earlier in the week. The governor has made the package part of his legislative plan.

It is a followup to a bill by Sen. Frank Mrvan, D-Hammond, that passed the General Assembly in 2005, which required elected officials to give up their seats after conviction, rather than waiting for sentencing. It came in the wake of the federal “sidewalks as bribes” trial, that included two sitting East Chicago city councilmen.

OPERS chief departs for Minnesota

The new leader of the teachers' pension fund in the Land of 1,000 Lakes is the former head of the largest public retirement system in the Buckeye State.

Laurie Fiori Hacking, who has led the Ohio Public Employees Retirement System for six years, leaves at the end of February. The Board of Directors will appoint Chief Operating Officer Blake Sherry as interim executive director and use a recruiter to help find a replacement by midyear.

During Hacking's tenure, the fund's assets grew to $68.6 billion from $56.6 billion in 2000, Chairman Richard Alexander said.

MD teacher pension boost faces challenges

A proposal to shore up teacher pensions in Maryland is getting a mixed reaction from state lawmakers.

Negotiators in the General Assembly say they are hung up on the price tag of the union's proposal: more than $500 million annually. They also are weighing an independent analysis that questions the argument central to the teachers union's campaign.

"We need to improve teachers' pensions, which are the worst in the nation," Maryland State Teachers Association President Patricia A. Foerster tells listeners in radio ads. "Many educators are leaving Maryland schools or changing professions altogether."

By the union's measure, teachers in Maryland who retire after 30 years receive annual pension payments that equal about 38 percent of their salary, compared with 60 percent in neighboring Pennsylvania and a nationwide average of 57 percent.

But an analysis by a consulting firm hired by the legislature tells another story.

"They keep saying, 'We're last in the nation,' and that's not true, and that bothers me a little bit," said Del. Mary-Dulany James (D-Harford), the point person on pensions in the House. "We're actually in the middle."

When other factors, such as yearly cost-of-living adjustments and Social Security benefits are added to the mix, retired teachers and other state employees in Maryland take home slightly more than 80 percent of their final salary after 10 years in retirement, according to the actuarial firm Cheiron Inc.

That puts Maryland behind Pennsylvania and Virginia but ahead of the District and on common ground with states including Delaware and West Virginia. The study also found that teachers in Maryland contribute a smaller share of their salaries toward retirement than in all but seven other states.

David E. Helfman, executive director of the union, took issue with the assessment, which he said was based on unrealistic assumptions.

"They're wrong. Teachers don't retire and ask themselves, 'What will I be bringing in 10 years in the future?' " he said. "What's important is the benefit at retirement."

Louisiana retirement system has own blog

The Louisiana State Employees' Retirement Sytem, which identifies itself by the acronym "LASERS," has its own blog. It is called The Daily Beam, obviously a word play on "LASERS."

It offers a scan of retirement-related news items similar to what we do here at Public Pension News. Not a bad effort.

If you know of a public retirement system that operates its own blog for the benefit of its members, please send the link to:

hkanders@gmail.com

I would love to begin linking to system blogs in the sidebar.

And, what about private pensions?

On the Washington Post website, cartoonist Tom Toles illustrates the pension problems facing private-sector employees.

A "class war" is brewing over pensions

Blogger David Sirota takes notice of the multi-front attack on secure pension benefits.

Slowly but surely, pension issues have become the new front in the class war being waged on ordinary Americans. And what's particularly disturbing is politicians and media pundits who constantly portray those who have managed to secure decent pensions as greedy and evil. Big Money interests that be want us to believe that workers who earn a decent pension are evil - as if retirement security is something we shouldn't all aspire to. We saw this during the New York City transit strike, where the political Establishment tried to pit the working class against itself and deflect attention from the real culprits, essentially saying the transit workers were evil for having banded together to secure decent wages/pensions, and that they should just accept economic persecution like other workers are forced to accept. And we are now seeing it again in the debate over state public pensions.

In this USA Today story about how politicians have refused to adequately fund public pension commitments, Alaska Republican state representative Bert Stedman calls for massive cuts to state worker pensions, claiming "If we don't act now, we're going to have social conflict in the future between the haves and the have-nots — those with government pensions and those without." That's exactly the frame the right-wing wants us to see these issues in: the supposedly evil "haves" are those workers who secure a decent retirement, and they are the ones supposedly harming the "have nots." Not surprisingly, this exact frame is parroted on Fox News, most recently with Neil Cavuto hosting a show shamelessly regurgitating the concept that workers with decent retirement benefits are evil.

But really, what a lie it is. Beyond the fact that this line of reasoning actually asks us to treat pension cuts as a virtue and secure retirement as evil, there are the actual economic realities of what's actually going on. For instance, one paragraph before the Alaska Republican made his ridiculous comment, USA Today noted that "average annual benefits for retired state and local workers grew 37% to $19,875 from 2000 to 2004." That's right - we're actually expected to believe there is a crisis because between 2000 and 2004 the average state/local workers' annual pension grew from $14,507 (just above the poverty line) to $19,875. Worse, we're expected to believe that these people earning less than $20,000 a year in their retirement are the evil "haves" who are hurting the have-nots.

New accounting rules endanger pension, health benefits

New federal accounting rules could cause employers to further restrict or eliminate pension and health benefits for their workers.

The new rules require balance sheets to reflect the cost of current and projected benefits and the effect they have on the bottom line.

The changes — likely to begin by year's end — come as a growing number of companies freeze pensions and cut retiree health benefits, shifting risks and costs to workers. In recent weeks, IBM and Verizon Communications have joined the list of those announcing they will freeze their pension plans.

But some experts say regulations requiring companies to more accurately calculate and show the cost of their retirement promises could speed up the move by employers away from guaranteed pensions and other benefits.

"Changing accounting rules can cause companies to change their behavior," said David Zion, an accounting analyst with Credit Suisse First Boston.

Rules now in place give companies cover. Many have made expensive retirement promises without putting aside all the money needed to meet them. But they don't have to fully disclose the shortfalls in their earnings statements or on their balance sheets.

Instead, firms can post very positive numbers based on assumptions about investment returns, when the actual returns would hurt their results. And while companies are required to disclose pension figures in footnotes to financial statements, even those can be difficult to decipher.

"If you change those rules, you take that protection away, and our thinking is companies may have to go out and protect themselves," Zion said.

"Protecting themselves" could mean scaling back benefits in a climate that is already trending away from the secure pensions that generations of workers came to take for granted. Future generations of American workers may find themselves bearing the majority, if not all, of the risk for their medical and retirement security.

A Defense of DB Pension Plans

J. Bradford DeLong, an economist and blogger, writes an eloquent defense of defined-benefit pension plans on the website TomPaine.com. He builds his thesis around the corporate trend of abandoning DB plans in favor of 401k-style defined-contribution plans.

DC plans, DeLong emphasizes, place their account-holders at the mercy of the stock market, which many economic conservatives argue is a better model than the guaranteed benefits of DB pensions. He disagrees and argues that governments should resist the temptation to abandon defined benefits in favor of defined contributions.

This fall-off in private defined-benefit pensions is a bad thing, because the configuration of asset prices suggests that young and middle-aged workers value defined-benefit pensions extremely highly. Historically, the gap between expected returns on low-risk assets like government or investment-grade bonds and high-risk assets like stocks and real estate has been very high.

In my opinion, at least, this is partly because the memory of years like 1930 and 2000, when stocks performed very badly, occupies too large a place in investors’ minds. Workers and other asset holders place a very high value on safety, security, and predictability, so a defined-benefit pension plan is extremely valuable.

But in today’s world, only national governments are large enough to be able to ensure that the pension assets will actually be there when workers retire. I am enough of a social democrat to believe that if there is an economic service or benefit that citizens value extremely highly and that only the government can provide, then the government should provide it.

We economists know that there are many drawbacks to expanding the role of government. But the collection of payroll taxes and the writing of pension checks is the kind of routine, semi-automatic task that government can do well. It is even more important and valuable that government does it in our post-industrial, network-age society than it was in the past.

USA Today: Public pensions becoming more generous

USA Today suggests that, in contrast to the private sector, public pension plans are offering increasingly generous benefits to their members.

Many corporations have replaced traditional pension plans, which pay monthly benefits for life, with plans that cost employers less and pay workers a lump sum when they retire. Alcoa, the world's largest aluminum producer, announced Monday that it would do so for most new employees effective March 1.

Governments have been moving in the opposite direction: increasing monthly benefits, making it easier to retire at 55 and spending more on retiree health benefits. State and local governments, which cover 21 million workers and retirees, have been adding benefits the fastest:

•A December study of 85 big public pensions in all 50 states — covering three-fourths of public employees nationwide — found that governments continued to enhance benefit formulas, ease early retirement and improve other benefits from 2000 through 2004 despite states' financial problems. The increases were enacted on top of even larger benefit changes approved from 1996 to 2000. The study, conducted by the Wisconsin Legislature, is one of the most comprehensive on the issue.

•The New Jersey Legislature has approved 17 benefit enhancements since 2000 that increased the unfunded obligations of public pensions in the state by $6.8 billion, according to a task force studying the issue.

•Average annual benefits for retired state and local workers grew 37% to $19,875 from 2000 to 2004, the most recent data available, according to the Census Bureau. The rising payments reflect the early retirement of baby boomers, who started to qualify for full benefits in 2001, at age 55, under most government pensions.

"These pensions are unaffordable," says Alaska state Rep. Bert Stedman, a Republican. "If we don't act now, we're going to have social conflict in the future between the haves and the have-nots — those with government pensions and those without."

Reg Weaver, president of the National Education Association, which represents teachers, says legislators shouldn't respond to pension problems in the private sector by attacking government pensions. "Pensions are a national problem, but it's not in the interest of workers to diminish either type," he says.

Retirement a factor in shrinking California teacher work force

California expects to lose 100,000 teachers over the next ten years. The reasons, according to a new study, are two-fold: the prohibitive cost of living in the state on a teacher's salary; and large-scale retirement of baby-boom aged educators.

"We have a large group in the retirement phase and the number of those incoming are not matching up," Victor Valley Union High School District's Senior Director for Certificated Personnel Joseph Andreasen said. "We have a large contingency of teachers that over the next 10 years will be retiring ... about a fourth of our staff, maybe a third."

To simply keep up with the area's growth, district officials had to hire 107 new teachers for the 2005-06 school year — 57 more then they expected. Andreasen anticipates needing 60 additional teachers for the next school year.

Aggressive recruitment is the main method local districts hope to use to beat the odds.

"We're going to several job fairs both in and out of state. We're going to Oregon, Ohio and looking down south in Louisiana and Alabama, areas affected by the hurricane, to hire displaced teachers looking for a job who may be wanting to come to California," Andreasen said.

Indiana weighing pension protections

Indiana state lawmakers will debate measures designed to protect the pensions of public employees who lose their jobs due to privatization or cutbacks.

Governor Mitch Daniels has proposed awarding contracts to private firms for services now provided by state agencies. This could result in office closures and job eliminations. Two Republican state senators are introducing a bill containing several protections for public employees, including:

- Workers within two years of certain retirement options could opt to retire when their jobs are lost.

- The state could pay workers their current salaries if they take another state job with a lower classification. For example, if someone made $40,000 at the Department of Transportation and the job was lost, the person could take a $35,000-a-year DOT job and still be paid $40,000. However, it would be up to the DOT to opt to pay the higher salary.

- Workers would become vested in their pensions at the time they lose their jobs, regardless of the number of years they worked for the state. Currently, state employees’ pensions are vested only after 10 years. The worker’s benefit received at retirement would reflect the difference.

New Hampshire to bolster public pension funds

In state after state, public retirement systems are coming under scrutiny and attack. Many say public employees should follow their private sector counterparts by having their retirement accounts put at the mercy of the stock market, with defined-contribution pension plans.

New Hampshire, by contrast, is taking a counter-intuitive approach.

By one estimate, 21 percent of all U.S. companies plan to freeze pensions at current levels, while 17 percent report plans to stop offering them altogether. Most are shifting retirement responsibility to their employees through 401(k)s.

But not for public employees in New Hampshire, where the state retirement board is planning to increase costs to state and municipal taxpayers for funding its workers’ pensions.

Today, there are 20,000 retired public workers drawing a pension through the state retirement board, 51,000 active members and a $4.7 billion trust fund.

Meanwhile, state and local contributions toward firefighter pensions are projected to increase from 22 percent of those firefighters’ salaries to 24.4 percent. The state retirement board plans to bump the bill to municipal and state taxpayers for teacher pensions from 5.7 percent of their pay to 8.9 percent. For police officers, the current local and state contribution of 14.9 percent is projected to increase to 18.2 percent.

Those increases would become effective July 1, 2007.

Colorado GOP to use PERA as political issue

The Associated Press reports that the Republican Party in Colorado is pulling out all the stops in a bid to regain control of the state legislature. One of the arrows in its quill is the state retirement system.

Besides playing defense, Republicans are pushing their own priorities: cracking down on illegal immigration and tackling the state's troubled pension system, which has an unfunded liability of more than $11 billion.

[House Minority Leader Joe] Stengel doesn't have a specific remedy for the Public Employees Retirement Association, but thinks lawmakers need to consider all their options, such as requiring employees to pay more into the system; switching to defined contribution plans such as 401(k) accounts like the private sector is doing; and reducing benefits.

"Republicans are willing to say let's make the tough decisions now. Let's save the system, let's make sure that all the retirees get the benefits they've been promised and that they've paid into instead of waiting more time," he said.

Wars and Rumors of Wars

CNN/Fortune posts a dispatch from the pension wars.

A hint of what's to come could be seen in the New York City transit strike. Most of America didn't notice exactly what sparked the first such strike in 25 years, costing businesses, individuals and the city hundreds of millions of dollars. The answer is pensions. The transit authority and the workers were agreed on virtually everything except how much new employees would contribute toward their pensions--6 percent of wages vs. 2 percent -- and neither side felt it could give an inch on that.

The reasons illustrate the larger problem. The transit authority, like many private and public employers, is watching its pension costs rocket as longer-living retirees increase in number. That burden will become unbearable. On the other side, union members are watching employers nationwide dumping or cutting their pensions just as Social Security starts to look shaky. They figure retirement security is the one thing they cannot sacrifice. Result: war.

Ax to fall at San Diego pension board

In his State of the City address, San Diego Mayor Jerry Sanders is expected to call for the resignations of several members of the city pension system's governing board.

The pension board is comprised of 13 members. Seven of the board members are appointed by the City Council, but one of those positions is currently vacant. Sanders plans to ask the six current city appointees to tender their resignations so that a new slate of seven members can be selected by the city,

Colorado Gov. Bill Owens: We must reform PERA

In his annual State of the State address, Colorado Gov. Bill Owens spoke about the need to make changes to the retirement system for state employees.

"One of the biggest challenges facing us this session is reforming the Colorado Public Employees’ Retirement Association-or PERA. With current unfunded liabilities of more than $11 billion, PERA will simply not be able to fulfill its future obligations unless we make changes now.

We must tackle this problem this year. I appreciate Treasurer Hillman’s strong leadership on this issue, and I look forward to finding a solution that’s fair-both to state employees as well as to Colorado taxpayers.

Almost everyone agrees that reform is necessary, and most largely agree on what those reforms should look like.

First, we do need to restructure PERA’s board, which the Rocky Mountain News described as "unwieldy," with no representation from the "tax paying public." The Pueblo Chieftain also has called for a reorganized board "with independent trustees who have no skin in the game."

Clearly, the new board should include members who are not part of the pension plan, and who have some investment experience.

I support an 11-member board comprised of five people elected by PERA members and four appointed by the Governor and confirmed by the Senate, with the State Auditor and Treasurer completing the board.

Second, we need to modernize our pension system to reduce current and future unfunded liabilities. This will require a separate tier for newly-hired employees that is stable, sustainable, and less expensive to the taxpayer. This reform will significantly reduce the future burden on government while at the same time attracting quality workers to state government.

We also need to take the politically tough step of examining benefit levels for our current employees. We can help make the system more sustainable by changing the age at which retirees receive full benefits and-if necessary-reducing benefits in the "out" years for those furthest from retirement. These changes should not affect those closest to retirement, but could be phased in for those who have years to go.

And I believe that before any change in benefits can occur, the Legislature should be required to obtain an independent actuarial review to determine the impact of the change.

Finally, we should expand the defined contribution plan to give workers more freedom over their money and reduce future unfunded liabilities."

Pressure for Montana to adopt IBM pension model

The DB versus DC debate comes to Montana.

The Missoulian opines that Montana and its public employees would be better off with a 401k-stlye defined contribution pension plan, as opposed to the traditional defined benefit plan in place now.

Montana should convert its public employee retirement system to a defined-contribution plan for the same reason IBM just did. Many private companies are converting. A Hewitt Associates study cited in a recent edition of USA Today noted that only 67 percent of large employers now offer conventional pensions, compared with 91 percent 20 years earlier. More and more are converting to defined-plans that fulfill the employer's obligation with each paycheck and give employees control over their own funds - and the knowledge of exactly how much money they have for retirement.

People often say they'd like to see government run more like a business. Here's one good way to do it - a way likely to serve employees and taxpayers better over the long-run than the current, unsustainable pension system.

Of course, government is not a business. Government and business are designed to do different things. Businesses exist in order to maximize profits. Government exists to provide for the needs of citizens.

According to the National Association of Retirement System Administrators (NASRA), DB pension plans are one of the tools governments use to attract and retain qualified workers. This, too, is good for public employees and for taxpayers.

In general, public employers recognize that DC plans have many positive attributes, but to make them work well, many factors must fall into place:

participants must consistently make sound investment decisions over their working and retired lives; they must remain in the workforce steadily, avoiding lengthy time off for having children, raising a family, completing an education, or for illness; they must have a sufficient amount withheld from their pay; they must avoid borrowing against and spending their retirement assets; and they must make appropriate decisions regarding withdrawal rates during retirement.

Even then, employees might exhaust their assets after retirement. Hence having a DB plan as the primary retirement benefit protects public sector employees against many of these problems

Public DB pension plans have also enabled public employers to achieve important objectives related to the recruitment and retention of quality workers. These plans financial security in retirement and reduce retiree reliance on public assistance programs. The fact that these plans have evolved relatively independently of the federal regulatory structure governing 16 private pensions has allowed the public plans to engage in an ongoing process of creating and modifying plan designs and governance structures to meet the unique needs of public sector employers. The independence, flexibility, and profitable prudence of these plans will continue to support public employers in their ongoing mission to serve taxpayers, while providing financial security to retired public employees and significant economic benefits to their communities. Public plans are, indeed, a useful component of the new retirement paradigm of the future.

Those who wish to preserve public DB pension plans should not leave unchallenged the simplistic argument that if DC plans are good enough for private-sector employees, they are good enough for public employees.

Changes loom for Washington state pension system

This article in The Olympian frames it as the end of an era for state employees in Washington, as the legislature looks at ways to close a multi-billion dollar unfunded liability.

When the stock market crashed in 2001, the drop in the investment returns meant the state and workers were not putting enough money into some plans, and a steep increase in contributions was averted by agreeing to pay more than necessary in the future in exchange for paying less than necessary then.

The unmet need — part of a total unfunded liability of more than $4 billion — has lawmakers anxious to make changes. But unions representing state workers will want something in exchange for giving up programs that benefit their members.

NYC Teacher pension fund looted

Police have made one arrest in an identity-theft scam that targeted members of the New York City Teacers' Retirement Sytem.

The New York Post reports that it was an inside job.

Law-enforcement officials yesterday said they were still investigating what they believe was a multiperson identity-theft ring that accessed pensioners' bank account and Social Security numbers, their dates of birth and security pass codes.

Roughly $42,000 was stolen using the financial information of at least seven pensioners, and checks totaling more than $359,000 made out to 19 members or their beneficiaries were discovered in possession of the retirement-system insider, according to court papers.

The NYCTRS manages more than $30 billion in pension assets for more than 150,000 employees and retirees of the city Department of Education and the City University of New York.

"I still can't fathom what happened," said Diana Shaneberger, 37, who was scammed out of $6,000 last summer. "I'm really disenchanted with the whole system. They're incompetent."

Although as many as 5,800 accounts were said to have been accessed, it was not clear whether data on all of them, or only some, was actually stolen.

Jerome Boyd, a retirement system clerical employee, was arrested in connection with the scam.

Corzine to address NJ pension costs

One of New Jersey Governor Jon Corzine's first orders of business will be to address rising costs in the state pension system. Gannett reports that measures include a renegotiation of contracts with one of the state's largest public employee unions.

State and local governments face a $12 billion pension deficit. And the state's full payments for teacher and public worker retirement funds are expected to increase to $1.8 billion in Corzine's first budget. The state is spending just $299 million from its general fund for pensions in the current budget. Employee benefits are expected to cost taxpayers $6.9 billion in the 2010 budget, more than 21 percent of all state spending, according to the task force.

State government and public workers should share the pain of correcting a long-simmering problem, Murphy said.

But the plans proposed by the task force could strain an already tight state budget. Increased spending to close the deficit could force lawmakers to choose between higher taxes or cutting state programs. Other proposals to trim costs face opposition from public employee unions, which have aggressively fought cuts in benefits.

At a recent news conference, union leaders blasted a plan that would save the state money but cost retirees more for prescription drugs. Rae Roeder, president of Communications Workers of America Local 1033, was asked what concession the union would be willing to make to cut costs.

"We've already made our concession," Roeder said. "We work and do the job for less pay than private industry. That's the concession we made when we came to work for the state of New Jersey."

Is retiree health care next to go?

The AP reports on a change in accounting rules that could cause companies to abandon subsidized health coverage for their retirees. This comes amid reports that traditional pensions are falling by the wayside, transfering much of the risk of retirement from employers to employees.

With health care, private employers face the possibility of the costs becoming a threat to shareholder value.

Accounting regulations for both pensions and retiree health-care costs are poised to change in the next five years, in what could be the largest shift in accounting rules in more than 30 years.

"We believe this project will have a significant impact on evaluations, income and balance sheets, and will become the major issue in financial accounting over the next five years," said Howard Silverblatt, equity market analyst at Standard & Poor's.

The Financial Accounting and Standards Board, the arbiter of the nation's accounting rules, has said it will require companies to add their net pension and retiree health-care costs to their balance sheets within the next year. Then, over the next three or more years, the accounting methods for pensions and retiree health-care costs will also change.

The first change, which will move pension and retiree health- care costs from financial footnotes to balance sheets, could be dramatic, increasing companies' leverage and changing computed returns, book value and shareholder equity ratios. These ratios are closely watched, since many loans and bonds deals cap a company's leverage ratio. And the changes could be eye-popping. The aggregate drop in shareholder equity, for instance, will be 10 percent, Silverblatt wrote in a December report.

In today's corporate environment, one imagines companies will not be inclined to accept such a potent threat to the bottom line and to the value of their stock. Forcing a company to choose between its retirees and its shareholders places retirees in grave danger.

New York MTA: Pension demand was a mistake

From the Times:

The chairman of the Metropolitan Transportation Authority said yesterday that he had erred in making pension changes a central demand in contract negotiations with the city's transit workers, a miscalculation that helped lead to a 60-hour subway and bus strike the week before Christmas.

The chairman, Peter S. Kalikow, did not take responsibility for provoking the strike, the city's first since 1980, but he acknowledged misjudging the union's hostility to his demands that future workers accept a higher retirement age or contribute more to their pensions than current workers do.

"I put out a proposal that I thought would be most palatable to the union, and it turns out I was wrong," he said in an interview. Before the strike, Roger Toussaint, the president of Local 100 of the Transport Workers Union, had repeatedly said he would not accept a pension plan that did not treat future workers the same as current ones.

San Diego pension officials are indicted

Five public pension officials in San Diego have been indicted on fraud and conspiracy charges.

The New York Times reports:

The charges centered on a 2002 decision by the 13-member San Diego City Employees' Retirement System to enact a plan to increase significantly the pension benefits of city employees, including all the defendants, while failing to provide sufficient money to keep the pension fund solvent.

Federal prosecutors said the five defendants had conspired to hide the details of the proposal from other members of the pension board as part of a scheme to enrich themselves and cover up the financial danger to the pension system posed by the plan.

The decision helped to push the city to the brink of bankruptcy and led to the resignation of Mayor Dick Murphy last spring. The San Diego retirement system now has a deficit of at least $1.4 billion, and the city is unable to borrow in the capital markets.

The local United States attorney, Carol Lam, said the five pension fund officials had violated their obligations to city retirees and the taxpaying public.

NY Times: Corporate America shedding traditional pensions

The Times pulls together a wrap on its recent coverage of the trend away from defined-benefit pensions and toward 401k-style defined contribution plans.

The death knell for the traditional company pension has been tolling for some time now. Companies in ailing industries like steel, airlines and auto parts have thrown themselves into bankruptcy and turned over their ruined pension plans to the federal government.

Now, with the recent announcements of pension freezes by some of the cream of corporate America - Verizon, Lockheed Martin, Motorola and, just last week, I.B.M. - the bell is tolling even louder. Even strong, stable companies with the means to operate a pension plan are facing longer worker lifespans, looming regulatory and accounting changes and, most important, heightened global competition. Some are deciding they either cannot, or will not, keep making the decades-long promises that a pension plan involves.

The theme of the piece is that the shedding of pensions is characteristic of a trend placing more risk on employees.