AZ retirees lose annual increases

Annual pension payraises that thousands of Arizona retirees have received for more than a decade will not be available this year. The increases will not be coming for at least another five years, as well.

The Arizona Republic reports:

The Arizona State Retirement System, which covers 76,000 retired teachers, school district and non-public-safety city and state retirees, said that low returns on investments from 2000 to 2002 drained the fund used to give the annual bump-up. It will take several years of strong returns before the system is able to give retirees raises again, officials said.

Though not tied to the Consumer Price Index, these annual July 1 raises were viewed by many retirees as cost-of-living increases. The retirees now worry about the lost income that will add up over the next five years, especially as health insurance rates are expected to increase in January.

"Most people depend on it, look forward to it and expect it," said Barbara Masztakowski, 67, who retired from the Chandler Municipal Airport in 2003. "Has gas stayed the same? Groceries stayed the same? Anything stayed the same? No. But my income is going to."

P & I: DC plans are bad for retirement

An article in the industry magazine Pensions & Investments says it is a bad idea to rely on defined contribution pension plans for retirement income.

M. Barton Waring, managing director of client strategy at Barclays Global Investors, San Francisco, and Laurence Siegel, director of investment strategy at the $10.7 billion Ford Foundation, New York, assert that defined benefit plans are more efficient at providing retirement savings than defined contribution plans. Their working paper, titled “Don’t Kill the Golden Goose,” is under consideration to be published by the Harvard Business Review.

[...]
“We regrettably but reasonably conclude that few employees can ever expect a secure and prosperous retirement, with reasonable income replacement, using the defined contribution-plan structure alone,” Messrs. Waring and Siegel wrote in their paper. “We are kidding ourselves when we even speak the phrase ‘defined contribution retirement plan.’ They aren’t retirement plans at all, but modest savings plans.”

This information has particular resonance at a time when many states seek to emulate the corporate 401k model for public employees' retirement plans, and when Rep. Jim McCrery, R-LA, chairman of the House Subcommittee on Social Security, is pushing privatization once again.

LA retirees to receive COLA

Retired members of the Louisiana State Employees' Retirement System will receive a cost-of-living adjustment for the first time in four years.

Some 32,000 retired state employees will get 2.4 percent cost-of-living increases in their pension checks beginning July 1.

The Louisiana House gave final approval Thursday to the plan which will mean an average $31.20 per month in retirees’ pocketbooks.

House Retirement Committee chairman Rep. Pete Schneider, R-Slidell, said the COLA “will probably cover the increase in Group Benefits” health insurance premiums.

OH Coingate probe looks at pension officials

A criminal fraud investigation involving the Ohio Bureau of Workers' Compensation is expanding to examine the conduct of some state pension officials.

Authorities are trying to determine whether gifts provided by brokers and vendors violated laws requiring public officials to disclose such items to the public, or whether the gifts led to conflicts of interest or even constituted bribes.

Board members at the Ohio Police & Fire Pension Fund and State Teachers Retirement System already have been prosecuted for improperly accepting freebies from vendors or failing to disclose those gifts.

But the investigation of investment scandals at the bureau is uncovering other information, including situations in which brokers or vendors giving gifts to bureau officials possibly were doing the same at some pension systems, The Dispatch was told.

CA members face higher health care costs

Members of CalPERS in eight California counties could find themselves in a health care plan that is more expensive than the one they have now.

The retirement system is considering replacing its HMO in those counties with a point-of-service plan.

Union leaders are balking at the proposed benefit changes and vow to press the issue when trustees act on the 2007 health benefits plan next week.

"These proposals are just another means of shifting the cost of health care from the employer to the employee without really looking at what is happening to drive up the cost of health care," said Yvonne Walker, a negotiator with the Service Employees International Union Local 1000, the largest union representing state workers. "As the cost goes up for co-pays, people will most likely hold off on treatment."

Some key changes on the table are:

• Increasing HMO co- payments to $15 from $10 for physician visits;



• Requiring members enrolled in preferred provider organization plans to obtain prior authorization for expensive imaging procedures such as MRIs or CT scans;



• Creating a PPO urgent-care network with a $20 co-pay;



• Introducing a new lower-cost Blue Cross of California PPO program that eliminates high-cost doctors. The plan would cut the number of physicians in the current network in half;



• Dropping HMO coverage in five rural counties: Colusa, Lake, Mendocino, Plumas and Sierra; and



• Replacing the HMO plan in Butte, El Dorado, Glenn, Mariposa, Napa, San Luis Obispo, San Mateo and Sonoma counties with a lower-cost point-of-service program.

In all, the proposals follow the fund’s recent cost-cutting strategy that included establishing prices by region, steering members to generic drugs and dropping HMO coverage at 23 higher priced hospitals, including 13 owned by Sacramento-based Sutter Health.

"Those (changes) are still reaping benefits," Grevious said. The smaller hospital network saved an estimated $36 million in 2005.

NJ cops defend pensions

The union representing law enforcement officers in New Jersey has a message for state lawmakers: pay us what you owe us.

Fearing another tough budget year will mean further underfunding for police and firefighters' pensions, a law enforcement officers union sued Wednesday to force New Jersey to pay for years of shortchanging their retirement system.

The suit, filed in state Superior Court in Trenton, aims to make the state pay the full amount it owes the pension system for this year and years past. That could mean $3 billion to $4 billion, according to New Jersey Law Enforcement Supervisors Association President Tom Moran.

"Do we work for Enron here? Or do we work for the state of New Jersey?" Moran asked. "Because if we worked for Enron, people would be going to jail for what they're doing to our pensions."

MA Lt. Gov. proposes Defined Contribution plan

Massachusetts Lt. Governor Kerry Healey says the state should abandon its Defined Benefit pension plan in favor of 401k-style private accounts.

"Our current system allows elected officials to leave public service with tens of thousands of dollars in perks," she said at a news conference at her GOP gubernatorial campaign headquarters.

She said her plan, which would need approval from the Legislature, could eventually yield more than $350 million in investment gains and administrative savings annually, while freezing the state's $13 billion pension unfunded liability.

"Each year, we have to steer taxpayer money away from education, local aid and health care programs to pay off the debt our pension system has accumulated," she said.

Healey's proposal also would also eliminate Massachusetts' 104 independent public pension systems and put their money in the state pension trust.

Thousands of dollars in "perks"? Is she talking about the retirement benefits that public employees earn for their years of service? It is easy, I suppose, to use fat cat "officials" as an example of why the traditional pension plan should be jettisoned. But, what about the tens of thousands of rank-and-file employees who spend their working lives serving the people of their communities and their state? What becomes of them?

Perks? Someone should hand Lt. Governor Healey a dictionary.

Someone should also hand her a copy of this analysis by NASRA.

There are good reasons for employers to retain a DB plan as the primary retirement benefit for public employees:

A DB plan is an effective tool for recruiting and retaining quality employees. Government’s exemption from most federal pension laws creates a rare competitive advantage for state and local government employers.

Providing a DB plan helps assure a secure source of income for retired employees, reducing the likelihood of these employees relying on public assistance during retirement.

By creating an incentive to retire, DB plans can facilitate an orderly transition of employees whose effectiveness or productivity may have waned. DC plans provide no such incentive, and may, in fact, serve as a disincentive.

This is to say nothing of the transition costs of switching from a DB plan to a DC plan, which benefit nobody so much as the financial services companies who will be crawling over each other for a chance to get their hands on all that cash.

I am unfamiliar with Massachusetts public pension law, but in my state, members of the public pension system have nothing to rely on but their DB retirement benefits. They do not pay into Social Security. If the same is true for Massachusetts public employees, the Lt. Governor's plan would place retirees entirely at the mercy of the stock market, without even Social Security as a hedge against destitution.

CO treasurer complains about PERA board

Colorado State Treasurer Mike Coffman, in a Pueblo Chieftan editorial, argues that the composition of the PERA Board of Trustees is weighted too heavily with retirees.

As we have seen with the recent failure of private sector boards - Enron and WorldCom come to mind - the size of the board, the qualifications of board members and the perspectives that those members bring to the table are critical to successful stewardship. Pension plans such as PERA can work, and they have worked successfully in Colorado, but leadership is a vital part of the equation.

While this year’s PERA legislation makes some changes at the margins of governance, ultimately it has kept the status quo: PERA beneficiaries in, taxpayers out.

Exxon directors re-elected

Despite the opposition of several public pension funds, all directors of the Exxon board were re-elected at the company's annual meeting in Dallas on Wednesday.

The pension funds, as institutional shareholders, sought the defeat of several directors who approved controversial pay and benefit packages for Exxon executives.

From Pensions & Investments:

ExxonMobil Corp. shareholders today elected all of the company’s 12 directors and voted 52.2% in favor of a shareholder proposal calling for the election of directors by a majority vote of shares, according to preliminary proxy-voting results. James R. Houghton, William R. Howell and Reatha Clark King received the lowest support among directors with about 79% of the vote each, said Russ Roberts, ExxonMobil spokesman. Walter V. Shipley received about 82% of the vote in favor. All other directors received support of about 95% or higher, Mr. Roberts said.

The $209 billion California Public Employees’ Retirement System, Sacramento, opposed the election of Mr. Houghton, Mr. Howell, Ms. King and Mr. Shipley.

The $72 billion North Carolina Retirement Systems, Raleigh, opposed Michael J. Boskin and Henry A. McKinnell Jr., in addition to Mr. Houghton, Mr. Howell and Ms. King.

The $96.1 billion (US$87.4 billion) Ontario Teachers’ Pension Plan, Toronto, opposed all 12 directors.

The funds were concerned about excessive executive compensation.