Saturday, February 23, 2013

My, my...look what the Republican legislature in FL is planning for their state pensions?

From John Curry, February 23, 2013
Of course, Ohio Republican legislators wouldn't do anything like that, would they?
Big state pension change analyzed by actuaries
Photo: House Speaker Will Weatherford, left, and Senate President Don Gaetz want to move the Florida Retirement System away from a defined benefit plan to a solely 401(k)-style defined contribution plan. File photo by Bill Cotterell. (Click to enlarge)
House Speaker Will Weatherford, left, and Senate President Don Gaetz want to move the Florida Retirement System away from a defined benefit plan to a solely 401(k)-style defined contribution plan. File photo by Bill Cotterell. The Republican legislative leadership's plan to "soft freeze" the Florida Retirement System -- making new public employees join a market-based investment pool similar to the 401(k) plans popular in the private sector -- will leave public agencies with dwindling numbers of employees contributing money to pay pensions for growing ranks of retirees, an actuarial study released Friday says.
"We are reviewing the study received from the actuary and will derive from it the fiscal impact of our plan to reform Florida's outdated pension system," House Speaker Will Weatherford, R-Wesley Chapel, said in a prepared statement. "Ultimately, we believe that reducing the taxpayer exposure to Florida's pension liability and creating greater fiscal predictability in our budget is in the best interest of all Floridians."
Weatherford requested the financial analysis from the Department of Management Services, which contracted with the Milliman consulting group of Vienna, Va., to assess the likely results. Weatherford and Senate President Don Gaetz, R-Niceville, are intent on making employees hired after Dec. 31 of this year join the "defined contribution" pension plan, rather than the "defined benefit" plan now covering most employees and retirees.
The switch is called a "soft freeze" because, instead of making all FRS members take their chances in the market, it would close the defined benefit plan to new hires as of Jan. 1, 2014. Current employees could still opt into the defined contribution system if they wanted to but -- based on current data -- not many are likely to switch.
A study by Florida TaxWatch, endorsing the switchover plan on Thursday, said 84 percent of public employees are in the "DB" plan, which has an unfunded actuarial liability of about 13 percent.
In a defined benefit plan, pensions are calculated with an established accrual rate -- 1.6 percent for state Career Service employees -- multiplied by average peak earnings and years of service. In a defined contribution plan, the employer and employee contributions are put in an investment pot that the employee can direct, and which is "portable" when leaving government service.
Legislative Democrats and labor lobbyists have argued that the defined contribution system will put employees at risk of losing retirement income. The defined benefit plan has a locked-in monthly payment, which may or may not be greater than the yield of the 401(k)-style defined contribution pension.
Gov. Rick Scott got the 2011 Legislature to impose a 3 percent payroll tax on FRS members, which was upheld by the Florida Supreme Court. Since the mid-1970s, the FRS had been entirely employer-paid but Scott -- who initially sought a 5 percent payroll fee -- and GOP legislative leaders argued that most taxpayers in the private sector don't have paid-up pensions or guaranteed monthly benefits.
"A soft freeze does not impute the current amount of the unfunded actuarial liability," the Milliman report said. "It reduces the normal cost component of defined benefit funding in future years."
That's what Weatherford and Gaetz like about the defined contribution system. They have warned that future Legislatures could be on the hook for massive tax increases, to fund a defined-benefit plan perpetually, if defined benefits are not phased out.
But over the next 30 years or so, Milliman said that could mean more retirees collecting benefits as current employees retire -- and fewer active employees remaining to support the defined benefit plan with their 3 percent and the employer contributions. Those rates range from 3.3 percent for regular-class members to 11 percent of salary for the "special risk" employees such as police, firefighters, prison officers and others in dangerous jobs.
"If future members (of FRS) cannot join the DB plan, the result is a declining DB payroll base on which contributions to fund the DB plan are traditionally made," Milliman said. "This would produce increasing contribution rates as a percentage of payroll, as the payroll over which the (unfunded actuarial liability) is spread declines."
The TaxWatch report on Thursday said there are 540,701 FRS members in the defined benefit plan and 103,045 in the defined contribution system, which has been available to employees since 2002. It said the FRS has 643,746 active employees and 319,689 retirees collecting benefits -- mostly from the defined benefit plan.
About 20 percent of FRS members are state workers. The rest are spread among county governments, school boards, universities, municipal governments and various regional agencies.
Related Research: Feb. 15, 2013 Actuarial study regarding Florida's pension plan requested by Speaker Will Weatherford
Reporter Bill Cotterell can be reached at

Thursday, February 21, 2013

From Mario Iacone, February 21, 2013
1.  A STRONG ADVOCATE TO ALERT RETIREES to possible upcoming changes in our Pension Benefits.  The newly adopted pension solvency law adopted by the State Legislature and signed by the governor has a provision that should be of utmost concern to retirees. It is the provision that will give the STRS Board the legal authority in the future to make major financial decisions regarding our pension system WITHOUT legislative approval.
2.  PRESERVE COLA and HEALTH CARE STABILIZATION FUNDDennis Leone believes our COLA and the Health Care Stabilization Fund will be future targets for total elimination by the STRS Board. This needs to be strongly resisted.
3.  PROTECT STRS ASSETS.  Dennis Leone believes an emergency contingency plan, which he first recommended in 2005, still needs to be developed at STRS in the event there is another significant drop in the stock market.  Leone's published concern in 2008 about the flawed revenue assumptions which the Board and staff persisted in using, has proven to be accurate. Despite being warned, STRS has been too slow to react to smaller raises being awarded to teachers statewide.
4.  TO MAINTAIN PREVIOUS STRS SPENDING REFORMS.  Dennis Leone has some suspicions about whether the spending reform and the oversight measures that were put in place during his first term on the STRS Board (2005-2009) are still in full effect. We must not see a repeat of the irresponsible spending practices that I discovered and published in 2003, which were followed by the court convictions of six Board members and the STRS Executive Director for ethics violations. It seems that near-unanimous Board votes have somehow become the current rule of thumb, with insufficient advocacy for retirees. Before any Board vote is taken, the question should always be: "How will this action impact retirees, and will it affect retirees adversely?"  
5.  STRS EMPLOYEES NEED TO PAY FOR HEALTH INSURANCEDennis Leone firmly believes that since retirees and active teachers have to pay more for their health insurance, then so should the 600 employees at STRS on a proportional basis.

Give 'em hell, Harry!

Date: Tue, 19 Feb 2013 
From: Harry Thistlewaite

Up until now, I thought we had pretty good health insurance.  I cannot say that about our drug coverage.  Our drug coverage is PATHETIC. I have recently wanted to change several of my medical doctors and when I contacted the doctors that I wanted to change to, NONE of THEM would accept Aetna Medicare PPO. I live in Las Vegas and I am wondering if other teachers in Ohio or other states are having the same problem.
If you have an explanation for this other than the health insurance and the drug coverage was the cheapest we could find for the retired teachers of Ohio. Oh yeah, I forgot. We now have fewer active teachers in Ohio and we have a Republican governor, and don’t forget we have a lot more Charter Schools -- or are they Academies?
Thank you
Harry Thistlewaite

Tuesday, February 19, 2013

RH Jones: SERS travel expenses an outrage?

From RH Jones, February 18, 2013
To all:
This is a follow-up to my previous letter of concern for SERS retired and active members. I would like to add the following information from the SERS web site: Although the appointed SERS Board member James Rosler is, in character, like our elected former STRS board member hero, Dennis Leone, Mr. Rosler, unfortunately, cannot be voted into office again as our Dr. Leone can be (and, I might add, hopefully will be). Remember appointed member Mr. Rosler for having the courage to speak against the SERS Board approval of the Hawaii travel for three:
1. For Cathy Moss’ Hawaii trip, the SERS Board, 3rd term, members' expense is $3972.03. Her term does not expire until 06/30/2016.
2. Barbara Phillips is the active employee SERS Board member and has the greatest expense at $3,978.16 for her May 19-23, 2013 trip to Hawaii. Since her 2nd term in office expires on 06/30/2013, can the SERS benefit much from her report of the trip in time before her term expires?
3. Mary Ann Howell is the retired SERS Board member whose term also expires on 06/30/2013 and is in her 2nd term of office. Her Hawaii trip expense is $3,281.96. Can she make a report before her term expires?  Note: for the three Board members, the OEA dispensed the information on them.
The SERS web site also reported that the whole SERS Board consists of nine members. Only seven members were listed, leaving two vacant seats. Since only five SERS Board members voted, I wonder if that is a quorum? Five out of nine voting on this total Hawaii trip expense of $11,232.14, when only three of the allotted nine-member board voted for it, seems to be not enough representation.  Could information gleaned from this Hawaii NCPERS meeting be of this great of an expenditure of SERS funds? What ever happened to just serving as the goal for being on a pension board, rather than expecting such perks as Hawaii trips? A logical, rational and reasonable person could certainly not justify this expenditure in any pension system.
Personally, I have dear SERS member colleagues, both active and retired, who served with me in the school system of my teaching career, most of whom were not paid much for their responsibilities. Certainly the SERS Board members should want to preserve the SERS pension system with prudent expenditures of SERS funds that certainly include travel expenses. All manner of successful retirement systems, which waste not and want not, use teleconferencing.
My opinion,
RHJones, retired teacher
Larry KehresMount Union Collge
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