TMRS Weekly News Summary • February 6, 2014

Contents

Markets and the Economy • Pensions News Summary • Other Benefit and Economic News

The Weekly News Summary is prepared by Angela Manzo Deats and is sent to the TMRS Board of Trustees, executive staff, Advisory Committee, and other interested parties. If you know someone who would like to be added to the Weekly News Summary mailing list, please send an e-mail to Angela (adeats@tmrs.com). 

Markets and the Economy

                             January 29, 2015         February 5, 2015

                                       Close                        Close    

DOW                          17,416.85                    17,884.88

S&P 500                      2,021.25                      2,062.52

NASDAQ                   4,683.41                      4,765.10

Russell 2000               1,190.18                      1,208.71

Wilshire 5000              21,329.59                    21,774.50

Russell 3000               1,205.22                      1,229.52

MSCI EAFE               1,792.03                      1,820.75

10-year Treasury Yield   1.75%                         1.82%                         

30-year Treasury Yield   2.32%                          2.42% 

U.S. Stocks Rally Along With Oil Prices -

Dow, S&P 500 Into Positive Territory for Year

U.S. stocks rallied Thursday, as a rebound in oil prices and upbeat company news helped push benchmarks back into positive territory for the year.

The Dow Jones Industrial Average rose 211.86 points, or 1.2%, to 17884.88, now up 0.3% for 2015. It closed with a yearly gain for the first time since Jan. 8.

For more information:

http://www.wsj.com/articles/u-s-stock-futures-rise-1423142850  

http://www.thestreet.com/story/13037139/1/stocks-rally-on-oil-rebound-as-dow-turns-positive-for-2015.html

Jobs Report Crushes It

The U.S. labor market leaped forward in January, capping the greatest three-month jobs gain in 17 years and delivering the biggest wage increase since 2008.

Payrolls advanced by 257,000 last month following increases in December and November that were even bigger than previously reported, figures from the Labor Department showed Friday in Washington. The unemployment rate rose to 5.7 percent from 5.6 percent as more than a million Americans streamed into the labor force seeking work.

The sustained employment gains are creating a virtuous cycle as Americans spend newfound incomes on goods and services. The growth in jobs will probably help assure Federal Reserve policy makers that the expansion is well-rooted and can withstand an increase in interest rates later this year. 

For more information:

http://www.bloomberg.com/news/articles/2015-02-06/payrolls-in-u-s-increase-more-than-forecast-along-with-wages

U.S. Stocks Gain on Strong Jobs Data

http://www.wsj.com/articles/u-s-stock-futures-flat-ahead-of-jobs-data-1423228518

Pension News Summary

TEXAS

Senators Agree It’s Time to Address Public Pension Debt

AUSTIN – Texas senators may not agree on much, but on Thursday the members of the Senate Finance Committee all said the Legislature needed to take a hard look at how the state funds public pensions.

The Employee Retirement System, or ERS, pays benefits and provides health care coverage to more than half a million Texans and their family members, including state employees, judges, elected officials and law enforcement. Even though the state Constitution requires it to be actuarially sound, the pension hasn’t been fully funded in 19 of the last 20 years, and every year it remains underfunded, the fund’s debt grows by $500 million.

Many lawmakers, including Senate Finance Chair Jane Nelson, R-Flower Mound, have promised tax cuts this session. But sen. Kevin Eltife, R-Tyler, said he thought lawmakers needed to address all of the funding mandates placed on the Legislature before considering tax cuts.

“The reason we’re in this mess is because we didn’t make the tough decisions over the last 10 years,” said Eltife. “Either cut spending so you properly meet your obligations, or raise new revenue…Instead we’ve short-changed pensions.”

While nearly every senator agreed the pension funding issue needed to be addressed, Eltife’s plea to put that before tax cut promises largely fell on deaf ears.

“You have to put this into context,” said Sen. Charles Schwertner, R-Georgetown. “In general, Texas is doing much better than other states. 

Sen. Joan Huffman, R-Houston, said she believed the Senate could address pension funding as well as promise tax cuts, while Sen. Lois Kolkhorst, R-Brenham, said she didn’t think it was appropriate to ask “all the people of Texas” to “prop up” the ailing pension.

For more information:

http://blog.chron.com/texaspolitics/2015/02/senators-agree-its-time-to-address-public-pension-debt/

Senate Budget Writers are Split on Employee Pension Urgency

http://www.statesman.com/news/news/state-regional-govt-politics/senate-budget-writers-split-on-employee-pension-ur/nj5cG/

Flynn Appointed Chair to Pensions Committee

Speaker of the House, Joe Straus announced Wednesday, committee assignments for the 84th Session of the Texas Legislature naming State Representative Dan Flynn, (R-Van), Chairman of the House Committee on Pensions. The Pension Committee has oversight of the following state agencies: The Texas Emergency Services Retirement System, The Board of Trustees of the Teacher Retirement System of Texas, The Board of Trustees of the Employees Retirement System, the Board of Trustees of the Texas County and District Retirement System, the Board of Trustees of the Texas Municipal Retirement System, and the State Pension Review Board.

Representative Flynn said , "The issue of pensions is going to be extremely critical this session and I am looking forward to the challenge that awaits me and the other six members of the committee as we work to improve and maintain the soundness of our Pension Systems and the best way to provide for the future of our teachers, state, and municipal employees."

For more information:

http://www.kmoo.com/sports/4758-flynn-appointed-chair-to-pensions-committee.html

Austin Retirees to Get New Tax Forms After Old Ones Were Incomplete

The City of Austin Employees’ Retirement System mailed out a second round of tax forms to 6,000 retirees this week after being flooded with calls about missing information on the first batch of forms.

On those form 1099-Rs, which are used to prepare tax returns, two boxes were left blank. One should have contained the total amount of retirement benefits a person received last year, and the other should have contained the taxable amount.

“We know they’ve been inconvenienced, and it’s frustrating,” said Christopher Hanson, executive director of the city’s retirement system, which received more than 1,500 calls this week about the issue.

It’s still unclear what exactly happened.

The retirement system sends data for the form 1099-Rs to Greatland Corporation, which then prints and mails the forms, Hanson said. The data from the retirement system was complete and correct, and Greatland hasn’t explained what went awry, Hanson said.

Bob Nault, Greatland’s president and chief executive officer, said in a statement that the incorrect forms were “the result of an isolated issue which our support team quickly helped identify and correct.” Greatland is based in Michigan and Wisconsin.

The retirement system pays Greatland about $7,000 a year, Hanson said. Greatland is not charging the retirement system for the second group of complete tax forms, he said.

The Internal Revenue Service can assess penalties for incomplete or incorrect tax forms, but since the complete 1099-Rs were mailed on Feb. 2 — the deadline for doing so — Hanson said he believes the retirement system won’t be dinged.

For more information:

http://www.mystatesman.com/news/news/local/austin-retirees-to-get-new-tax-forms-after-old-one/nj5dx/?icmp=statesman_internallink_invitationbox_apr2013_statesmanstubtomystatesmanpremium

Other States

Arizona
Ballooning Public Safety Pensions a Blow to City Budget 

Tucson’s City Council received bad news about its police and fire pensions Wednesday — it could have to pay an extra $17.9 million for the two funds.

That would boost the city’s total obligation for the two public-safety pension funds to about $62 million next year, exacerbating and already-difficult budget balancing act.

The ballooning costs are mostly the result of a recent Arizona Supreme Court decision overturning a 2011 state law designed to keep pension costs down.

A year ago, the court ordered the Public Safety Personnel Retirement System to reimburse retirees $40 million for past cost-of-living increases and to shift $335 million to a reserve fund to cover future cost-of-living increases.

The state pension board calculated how much of a dent the court order would put in each city’s retirement funds.

For Tucson, it dropped its police and fire pensions to under 40 percent funded through the plan’s investments, according to retirement system documents, and puts taxpayers are on the hook for $763 million in unfunded pension obligations owed to existing and future public safety retirees.

As a result, every dollar of salary will be matched by 65 cents for police and fire pensions.

For a firefighter or police officer making $50,000 a year, the city would have to pay an additional $32,500 for his or her pension.

For more information

http://tucson.com/news/local/govt-and-politics/ballooning-public-safety-pensions-a-blow-to-city-budget/article_595af52b-9d78-5a73-9ad9-3d3a11a0b1b4.html 

California

CalPERS to Receive $300 Million as Part of S&P's $1.5 Billion Settlements

McGraw Hill Financial Inc. and its subsidiary Standard & Poor’s Ratings Services have agreed to pay a total of $1.375 billion to settle lawsuits related to residential mortgage-backed securities and U.S. collateralized debt obligation ratings that S&P issued from 2004 to 2007.

The settlements resolve a lawsuit by the Department of Justice filed in early 2013, and lawsuits filed by the attorneys general of 19 states and the District of Columbia, said an S&P news release e-mailed by spokeswoman Catherine Mathis.

The company will pay $687.5 million to the DOJ and a total of $687.5 million to the states and District of Columbia.

The state of California will receive $210 million of the total, Attorney General Kamala Harris’ office said in its news release. The state’s two largest pension funds will receive portions of that total.

CalPERS will receive about $176 million, a news release from the pension fund said. The $296.5 billion California Public Employees’ Retirement System, Sacramento, will also receive another $125 million in a separate settlement regarding ratings on three separate investment vehicles that also collapsed during the financial crisis. Details regarding those three vehicles were not divulged by either CalPERS or S&P.

The $188.8 billion California State Teachers’ Retirement System, West Sacramento, meanwhile, will receive $23 million of the state’s total, CalSTRS spokeswoman Michelle Mussuto said.

For more information

http://www.pionline.com/article/20150203/ONLINE/150209971/calpers-to-receive-300-million-as-part-of-sps-15-billion-settlements

California
State Pension Funds Look to Recover More After S&P Settlement

The nation's richest public pension fund was a big winner in the settlement with Standard & Poor's Financial Services over its ratings on mortgage-backed securities lawsuits.

But that doesn't mean that the California Public Employees' Retirement System, with $296.5 billion in assets, has recovered all losses from alleged over-inflated investment ratings that helped spur the worst recession in half a century.

The nearly $1.4-billion settlement Tuesday with U.S. Justice Department officials and 19 state attorneys general provided CalPERS and the California State Teachers' Retirement system with $335 million. All but about $34 million went to CalPERS.

CalPERS recovered $176 million from the multi-state lawsuit and an additional $125 million from a separate complaint it filed against Standard & Poor's, a subsidiary of McGraw Hill Financial Inc.

For more information
http://www.latimes.com/business/la-fi-pension-funds-settlement-20150204-story.html

http://tpr.org/post/sp-pays-nearly-138b-settle-mortgage-crisis-claims 

California

CalPERS Fills Eliopoulos’ Former Role of Senior Investment Officer for Real Assets

Paul Mouchakkaa was named senior investment officer for real assets at CalPERS.

Mr. Mouchakkaa will replace Ted Eliopoulos, who was appointed CalPERS chief investment officer in September. He will be in charge of the continued restructuring of the $296.5 billion pension fund’s real estate program.

For more information
http://www.pionline.com/article/20150204/ONLINE/150209941/calpers-fills-eliopoulos8217-former-role-of-senior-investment-officer-for-real-assets

California

Stockton Bankruptcy Judge Calls California Pension Fund a 'Bully'

The judge overseeing the city of Stockton's bankruptcy case in California described the country's largest pension fund as a "bully" yielding an "iron fist," in a written ruling that reiterated his oral confirmation of the city's plan to exit Chapter 9.

U.S. Federal Bankruptcy Judge Christopher Klein's ruling again staked out ground for bankrupt municipalities to alter their workers' pensions, a contract that the California Public Employees' Retirement System had ferociously argued could not be touched. Stockton, however, elected to leave its pensions intact.

"CalPERS has bullied its way about in this case with an iron fist insisting that it and the municipal pensions it services are inviolable. The bully may have an iron fist, but it also turns out to have a glass jaw," wrote Klein, who orally confirmed the city's plan to exit Chapter 9 protections in October.

In Wednesday's memorandum, Klein noted that Stockton's plan achieved "significant net reductions in total compensation," including lower pensions for new employees and the elimination of up to $550 million in unfunded health benefits. These concessions were accepted by employees in exchange for preserving pensions.

For more information
http://www.reuters.com/article/2015/02/05/usa-california-stockton-idUSL1N0VF2J620150205

Florida

State Won't Investigate Jacksonville's Pension Fund

JACKSONVILLE, Fla. - Despite calls from a state representative, Jacksonville City Council members and other elected officials in Duval County, the governor's office will not investigate Jacksonville's Police and Fire Pension Fund.

Rep. Janet Adkins wrote to the governor in December, saying the public's trust had been broken and she wanted to know if laws were broken as well.

Melinda Miguel, chief inspector general with Gov. Rick Scott's office, sent Adkins a letter Tuesday saying her office received the request for a review, but added, "It appears that your concerns would be more appropriately handled at the local level."

The letter goes on to say: "If you are aware of specific criminal violations, you may refer this information to local law enforcement or the state attorney's office."

Adkins reacted to the inspector general's letter saying she respects how other public officials' decision even when she disagrees with them.

For more information
http://www.news4jax.com/news/state-wont-investigate-jacksonvilles-pension-fund/31073974

Florida
Venice Proposes Tax Hike to Pay for Pensions

VENICE - Property taxes will rise next year unless the city finds another way to pay for pensions owed the city’s public safety workers.

During a special meeting Wednesday, the City Council voted 6-1 to raise taxes in 2016 by a half mill, or 50 cents for every $1,000 in taxable value. The city’s current rate is $3.10.

The proposal would raise $1.5 million a year to pay down $17 million in unfunded pension liability. It would cost the owner of a home assessed at $300,000 after deductions about $150 more a year in property taxes.

For more information
http://www.heraldtribune.com/article/20150204/ARTICLE/150209859

Hawaii

State Employees Moving Bond Managers to New Risk-Based Allocation • 
Pension fund also looking for search firm for executive director position

Hawaii Employees’ Retirement System, Honolulu, is in the process of transitioning its fixed-income managers to two of its four new risk-based categories, said Vijoy Chattergy, chief investment officer.

Existing international fixed-income manager Oechsle International Advisors; domestic managers Pacific Income Advisers and First Hawaiian Bank; and core-plus manager Pacific Investment Management Co. will fall under the new principal protection category, which has an overall target allocation of 12%.

Core-plus managers Bradford & Marzec and Western Asset Management Co. will focus on credit under the broad growth category. PIMCO also has a credit mandate that will fall under this category. The target allocation for broad growth will be 76% of the overall portfolio and will include public and private equity managers and covered calls.

For more information
http://www.pionline.com/article/20150129/ONLINE/150129845/hawaii-employees-moving-bond-managers-to-new-risk-based-allocation?newsletter=investments-digest&issue=20150129&utm_source=Newsletters&utm_medium=email&utm_campaign=P%26I%20Investments%20Digest

Illinois

Illinois May Be the Next State to Let Municipalities File for Bankruptcy

Gov. Bruce Rauner wants to give cities, towns and counties the authority to file for bankruptcy protection, a move that could give local governments a stronger foothold when negotiating with local police and fire officials over costly pension obligations.

The governor made no mention of the idea during his State of the State speech Wednesday, instead burying the concept in a list of talking points the administration distributed to lawmakers. Rauner aides would not elaborate on how it might work.

But the single sentence calling for the state to "extend to municipalities bankruptcy protections to help turn around struggling communities" mirrors a proposed law introduced last month by state Rep. Ron Sandack, R-Downers Grove. Sandack said his aim was to give cities more tools for getting their financial affairs in order, including a "level field" when negotiating over pensions.

Federal law only allows municipalities to file for bankruptcy with explicit permission from the state where they are located, said James Spiotto, a municipal bankruptcy expert and attorney who is managing director of Chicago-based Chapman Strategic Advisors.

Currently, only the Illinois Power Agency has been given such authority. It would take passage of a new state law to extend the authority to municipalities.

Asked to explain how the law would be structured, Rauner spokesman Lance Trover said, "the specific details regarding authorizing communities to pursue that option will be part of an ongoing dialogue in the coming weeks."

For more information
http://www.governing.com/topics/finance/tns-rauner-illinois-bankruptcy.html

Illinois

Illinois In State of the State, Illinois Governor Pledges to Weaken Union

Declaring it's "make or break time," Gov. Bruce Rauner used his first State of the State speech Wednesday to lay out a comprehensive conservative agenda aimed at repairing the state by helping businesses while putting the brakes on the power of organized labor.

The rookie Republican governor called on lawmakers to approve his to-do list in total rather than piecemeal, but some members of the overwhelmingly Democratic House and Senate contended such rhetoric was more politically divisive posturing than proactive governing.

In office less than a month, Rauner hearkened back to themes he sounded in his successful campaign against Democrat Pat Quinn. Rauner sought to weaken the political influence of public employee unions. He proposed a two-year freeze on local property taxes. And he promised more money for education without revealing how he would accomplish it in a cash-strapped state.

… During the campaign, he assailed "government union bosses" and politicians for creating a "corrupt" system in which unions gave campaign donations to those who oversee their contracts. In his speech, he proposed banning campaign donations from public employee unions and allowing employees to decide not to join a union.

Rauner, who faces difficult contract negotiations with state public employee unions this summer, proposed further steps to restrict public unions, including giving taxpayers at the local level a say over municipal collective bargaining and benefits.

In addition, the governor expanded his complaints about organized labor to private sector unions by calling for the creation of what he called "empowerment zones" in which businesses can operate free from union requirements. Union critics call such areas "right-to-work zones." 

Moreover, Rauner proposed an end to project labor agreements and prevailing union wages being paid on state and municipal construction projects. He described the two union requirements as "uncompetitive bidding" and said the state could save billions of dollars that could be plowed back into a needed public works program. Such proposals pit Rauner against powerful construction trade unions, making the fate of those concepts murky.

For more information
http://www.governing.com/topics/mgmt/tns-rauner-illinois-speech.html

Kansas
Risky Pension-Bond Strategy Considered in Kansas

State Would Invest Issue Bonds and Invest Proceeds to Boost Pension Returns

Kansas is considering a corner of the municipal-bond market most states have come to avoid because of its risk—a $1.5 billion sale of so-called pension bonds to boost returns at the state retirement system.

The strategy, which Gov. Sam Brownback is proposing in the face of a growing state deficit, would help lower annual state contributions to the Kansas Public Employees Retirement System. Under the plan, the state would issue bonds and then invest the proceeds, making a decadeslong bet that pension-fund returns will exceed current interest rates for taxable municipal bonds.

For more information
http://www.wsj.com/articles/risky-pension-bond-strategy-considered-in-kansas-1423167830

Kansas
Retirees Rally Against KPERS Reforms

TOPEKA — Dozens of Kansas pension system beneficiaries rallied Wednesday to denounce Gov. Sam Brownback’s recommendation to slash state contributions to the system in response to a budget shortfall.

Withholding $58 million this year in scheduled state payments to the Kansas Public Employees Retirement System would delay by 10 years until 2043 the projected break-even point for the pension program. Under Brownback’s strategy, employee contributions into KPERS would not be postponed.

The Republican governor also urged the 2015 Legislature to authorize issuance of $1.5 billion in bonds to provide investment capital to KPERS’ portfolio. Trustees of the system would invest borrowed cash with the goal of generating long-term profits while also paying off bond obligations.

Dennis Phillips, chair of the Kansas Coalition of Public Retirees, said lawmakers had a responsibility to deliver financial certainty to 280,000 Kansas teachers, judges, firefighters and others participating in the retirement program. Sidestepping state payments to KPERS doesn’t make sense, he said.

For more information
http://www.gctelegram.com/news/state/retirees-rally-against-kpers-reforms/article_4f9bf1b0-8d92-5b5a-accd-7231732b62c6.html

Kentucky
'Double Dipping' Bill Gets Key Thumbs Up

A bill that would prohibit so-called "double dipping" by elected law enforcement officials in Kentucky passed a big step Wednesday, getting unanimous approval from a key committee.

FRANKFORT - The Kentucky bill that would prohibit so-called "double dipping" by elected law enforcement officials such as county sheriffs passed a key step Wednesday.

The Senate committee on state and local government passed the measure submitted by Sen. John Schickel, R-Union, unanimously. The bill, Schickel said, was based on the previous actions of sheriffs such as Boone County's Michael Helmig, who left office last November after winning re-election, only to return to office in January.

If Helmig indeed retired, that would have enabled him to start collecting a state pension as he returned to his full salary.

"I understand that this is largely symbolic ... but these kinds of actions are not in the spirit of the law," Schickel told the committee. Schickel first introduced the bill in the first week of the session last month.

For more information
http://www.cincinnati.com/story/news/2015/02/04/ky-double-dipping-bill-gets-thumbs-up/22863533/

Louisiana
Amid Rising Costs, New Orleans Employee Pension Fund Under Pressure to Trim Benefits

Officials in charge of New Orleans' largest public pension fund are considering changes that could relieve pressure on the city's budget but at a cost for employees and future pensioners. 

New Orleans Municipal Employees Retirement System board at a January meeting released a list of the potential alterations, which included raising the retirement age and increasing the amount of money employees are required to contribute. The board forwarded the possible changes to its actuary to evaluate how they would impact the health of the pension fund, benefits for employees and the city's budget.

The board produced the list of options at the request of City Council President Stacy Head. With pension costs eating at the city's budget, Head has been pushing the board to consider changes.  She also has floated several options of her own and sought expert analysis on how much certain cuts to current, vested employees would save the city. In a phone interview last week, however, Head said she has never suggested that benefits be reduced for employees vested in the city's plan.

The city is having to pay more into its pension funds because the retirement systems owe employees and retirees more in benefits than the value of their investments. Such imbalances are, in the pension world, called unfunded liabilities.

Having an unfunded liability doesn't mean a fund is broke, or even in immediate danger of going broke, provided the unfunded liability isn't extreme.

But growing unfunded liabilities are a red flag. That is a sign a pension fund is on an unsustainable path that, left unresolved, can end in default. .

For more information
http://www.nola.com/politics/index.ssf/2015/02/amid_rising_costs_new_orleans.html

Louisiana 
Teachers Pension Officials Decry Disparaging Report, Say Funding Problems are Being Addressed

The Teachers Retirement System of Louisiana defended itself against a critical report giving it a C- grade, saying the pension plan helps attract and retain qualified educators and that it is working to correct funding shortfalls. The Jan. 27 report from the National Council on Teacher Quality called Louisiana's plan underfunded and largely inflexible, giving it a grade on par with the national average.

The Louisiana system manages and distributes benefits for more than 156,000 retired and current educators. Like several other public employee pension systems in the state, it has a staggering debt, about $12 billion.

Louisiana began paying down what is now $19 billion in total pension debt in the late 1980s, which along with other measures, has helped contain costs. Generally, researchers criticized traditional "defined benefit" plans in Louisiana and other places. These plans guarantee a set level of benefits upon retirement and are too costly, researchers said. Still, retirement system officials said the plans help attract and retain quality personnel.

For more information
http://www.nola.com/education/index.ssf/2015/02/louisiana_teachers_pension_officials_decry_disparaging_report_say_funding_problems_are_being_addressed.html

Louisiana 
TRSL Responds to New Study About Teacher Pensions

http://trsl.org/main/inside.php?section=my_trsl&id=57989&page=news

Mississippi
Jackson County Supervisors Support Bill
That Would Open SRHS, Other Hospitals' Meetings

JACKSON COUNTY -- Jackson County supervisors Monday approved a resolution in support of Senate legislation requiring publicly-owned hospital board meetings be open to the public.

Senate Bill 2407, sponsored by Sen. Brice Wiggins, R-Pascagoula, requires publicly owned hospitals to follow the state Open Meetings Act and creates new requirements to serve as a trustee for a community hospital.

Supervisor President Barry Cumbest did not support the resolution.

The legislation came as a result of the ongoing fallout resulting from trustees at Singing River Health System voting to terminate the employee pension plan.

For more information
http://www.sunherald.com/2015/02/02/6050324_jackson-county-supervisors-support.html?rh=1

Nebraska
Omaha City Council Makes It Official,
OKs Pension Changes for Civilian Workers

It’s official: Civilian city employees hired after March 1 will participate in a new pension plan, one that functions more like a 401(k) plan. 

The pension changes, approved Tuesday by the Omaha City Council, mark a significant step in Mayor Jean Stothert’s goal of reducing employee costs and solving the city’s pension crisis

And, Stothert said, the new plan will protect the city from future unfunded pension debt.

“We knew we could not just accept a contract that would fix the financial problem this year or the city’s budget this year,” Stothert said. “We had to look into the future to prevent those things from happening.”

Under the plan, new employees will be guaranteed a certain amount of money as their minimum retirement benefit, like a traditional pension plan.

But their overall annual retirement payout will depend on the market, more like a 401(k).

This system, called a cash balance plan, is “an entirely new pension plan, one that hasn’t been implemented in the City of Omaha,” the city’s lead negotiator, Mark McQueen, told the council last month.

Current employees will keep a traditional pension plan. But they will receive less payout and have to contribute more going forward.

For more information
http://www.omaha.com/news/metro/omaha-city-council-makes-it-official-oks-pension-changes-for/article_fb9bb882-4a15-52b1-8a7b-f2f2f85d2fd7.html

New Jersey

New Jersey Pension Fund Earned Nearly 7.3 Percent in 2014

TRENTON, N.J. -- State officials say New Jersey's pension fund beat market expectations when it earned nearly 7.3 percent on its investments last year.

But analysts tell NJ.com (http://bit.ly/1zrPT8C) that those gains didn't live up to the 7.9 percent annual rate they say is needed to keep troubled pension fund from adding to its liabilities.

Tom Byrne, acting chairman of the State Investment Council, says its investments returned 7.27 percent, but were hurt largely because of market volatility in the second half of the calendar year.

In the fiscal year that began July 1, 2013, and ended halfway through last year, the pension investments had earned 16.9 percent. 

While the council manages the state's investments, it doesn't have any say in setting or making pension contributions.

New Jersey's public worker pension system is underfunded by about $37 billion, the report said. With roughly 770,000 active and retired employees, the fund doles out $650 million to $700 million a month to pay for pensions and benefits.

For more information
http://www.dailyherald.com/article/20150131/news/301319876/

North Dakota

North Dakota PERS Puts PIMCO and Wells Fargo Funds on Watch

North Dakota Public Employees Retirement System, Bismarck, put the PIMCO Total Return Fund and Wells Fargo Advantage Growth Fund on watch, an announcement on the retirement system's website said.

Reasons behind the status changes were not disclosed.

For more information
http://www.pionline.com/article/20150126/ONLINE/150129901/north-dakota-pers-puts-pimco-and-wells-fargo-funds-on-watch?newsletter=defined-contribution-digest&issue=20150126&utm_source=Newsletters&utm_medium=email&utm_campaign=P%26I%20Defined%20Contribution%20Digest

Ohio
Council Action Angers City Retirees, May Cause Speed Bump in Pension Deal

The Cincinnati City Council on Wednesday granted the mayor the ability to appoint himself or members of council to the Cincinnati Retirement System board, angering a retiree group who said such a change should have been negotiated in court.

Council's vote comes just over a month since Mayor John Cranley announced a deal with current city employees and retirees to put the city's pension system on solid financial footing over the next three decades. That deal is still being formalized.

Tom Gamel, president of the Cincinnati Municipal Employees Retirement Association, said his group wants to talk with U.S. District Judge Michael Barrett, who presided over the negotiations, about what council did. 

"It's part of consent decree — one of the items we wanted to address — the makeup of the board and how it operates," Gamel said. "By council putting forward right now, it's like they're completely disregarding part of the agreement. Here we had a consent decree process established, and they completely bypassed it for their own interests."

For more information
http://www.bizjournals.com/cincinnati/news/2015/02/04/council-action-angers-city-retirees-may-cause.html

Oklahoma

Oklahoma Police Pension Drops Hedge Fund Manager AKO Capital

Oklahoma Police Pension & Retirement System, Oklahoma City, terminated hedge fund manager AKO Capital, recently released board meeting minutes show. 

The reason for the manager's termination and the size of the $2.2 billion pension fund's investment in long/short equity AKO Fund could not be learned by press time.

As of Dec. 31, the pension fund had an actual 13.1% allocation to long/short equity and a 15% target.

For more information
http://www.pionline.com/article/20150202/ONLINE/150209990/oklahoma-police-pension-drops-hedge-fund-manager-ako-capital

Pennsylvania 
Bethlehem Town Meeting Thursday to Vote on New Staff Pension Plan

BETHLEHEM -- Voters will decide whether to adopt a new pension plan at a town meeting at 7:30 p.m. Thursday at Memorial Hall.

Since about 1970, the town has operated a defined benefit plan designed to provide employees with 25 percent of their annual salary upon retirement. Employees needed to work 20 hours a week for at least two years to become eligible. In addition, employees cannot enter the plan after reaching 55 years of age. And after the age of 65, the town stops paying into the plan, even if the employee continues to work.

However, the four Department of Public Works employees left the town 's pension plan two years ago when negotiating their current contract. Now part of the Municipal Employees' Retirement System, they pay 2.25 percent of their salaries toward retirement, and the town pays 11.98 percent. That leaves only one part-time librarian on the town 's pension plan.

For future employees, the Board of Selectmen has proposed a 457(b) deferred compensation plan, which operates for local governments much like a 401-K plan works in the private sector. Both employees and the town would be able to contribute a percentage of salary toward the plan on a pre-tax basis.

The proposal would cap the town 's contribution at 10 percent and allow the selectmen to choose the percentage as part of the budget.

For more information
http://www.rep-am.com/articles/2015/02/04/news/local/doc54d2257342cea740813999.txt

Pennsylvania
Central Dauphin School District Residents, Employees Hear Grim Report at Pension Forum

The turnout was great. The news wasn't.

An estimated 125 people - about half of them employees of Central Dauphin School District - showed up at Central Dauphin East High School Tuesday, February 3, to hear district administrators and an expert in public pensions explain how mandated pension payments threaten to crush even the best-funded school districts in Pennsylvania.

The auditorium was silent as pension and healthcare expert Rick Dreyfuss outlined the problem: $50 billion in unfunded liability in Pennsylvania's two public-employee pension systems, a 10-year history of underfunding contributions to the system and little political will for a long-term solution.

According to Dreyfuss, the Public School Employees Retirement System - which is where Central Dauphin's employees have their pension funds invested - was 62 percent funded as of July 2014, with a statewide shortfall of more than $35 billion.

For more information
http://www.pennlive.com/midstate/index.ssf/2015/02/central_dauphin_school_distric_61.html

Virginia
Governor's Proposed $150 Million Would Buy Down VRS Liability

The $150 million that Gov. Terry McAuliffe wants to deposit in the teacher retirement fund would save state and local governments almost $26 million in pension contributions in the fiscal year that begins July 1.

The proposed payment to the teacher fund would reduce government contribution rates for teacher pensions by 0.35 percentage point beginning in fiscal 2016, according to the Virginia Retirement System in a presentation to the Senate Finance Committee on Tuesday.

The reduced rate would save the state about $10 million and local school systems $15.8 million.

The governor’s pending budget proposal also would accelerate the 10-year payback of more than $741 million in contributions the General Assembly and Gov. Bob McDonnell deferred in 2010 to balance the two-year state budget at the end of the recession.

For more information
http://www.richmond.com/news/virginia/government-politics/general-assembly/article_ac4e9ec9-355c-5848-9ec0-b6980a751cf7.html?utm_content=buffer4bdf6&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer 

Wisconsin
(Opinion) • Did Pension Managers’ Foreign Stock Focus Cost Taxpayers?

MADISON, Wis. – The world is filled with what ifs, and nobody knows that better than Green Bay Packers fans and stock market investors.

What if that rarely used tight end wouldn’t have bobbled that onside kick …?

What if Aaron Rodgers could have had two good legs …?

It’s tantalizing. Tormenting.

Same goes for the missed stock tip, or the one that should have been missed, marked by many unhappy returns.

But the State of Wisconsin Investment Board, or SWIB, the investment manager of the $96 billion in assets that make up the Wisconsin Retirement System, doesn’t like to play the what-if game.

Indeed, SWIB seems to care little that preliminary returns for the public pension system’s $88.7 billion Core Fund lagged behind the most basic, vanilla core mutual funds, in many cases significantly. 

WRS investments managers are quite content with the recently announced 5.7 percent returns, touting that, once again, the Core Fund beat its preliminary one-year benchmark — although barely this time around.

“The positive preliminary returns should result in modest increases in monthly pension amounts for retirees and the interest rates credited to active employees’ accounts,” SWIB announced recently in a media release. 

But those “modest increases” could have been much higher, investment watchers say, had SWIB adjusted the Core Fund’s asset allocation mix. Such decisions cost the pension plan’s stakeholders — public sector employees and their government employers funded by taxpayers — who last year contributed a combined 14 percent, 7 percent each, to the pension pie.

For more information
http://watchdog.org/196574/pension-wisconsin-swib/

Other Benefit and Economic News

Teachers, Police, Others Would Get Boosted Social Security Benefits Under Bill Backed by Rep. Richard Neal of Springfield

Following up on an effort in late 2014, Democratic Congressman Richard Neal of Springfield has crossed the aisle with Republican Rep. Kevin Brady of Texas in introducing a bill to normalize Social Security benefits for public servants, including teachers, firefighters and police officers.

The bill, H.R. 711, was introduced by the two senior members of the Ways and Means Committee this week after it failed to get traction when introduced in November, following the mid-term elections. It's primary goal is to eliminate the Windfall Elimination Provision formula, which was established in 1983, and can reduce Social Security checks for public servants by approximately $400 a month, according to Neal and Brady.

If the bill is passed, a municipal employee who pays into the Social Security system like other working people, would have their benefits calculated based on their actual contributions and work history.

"If Americans are going to enjoy their golden years financially secure and comfortable, they must have a sound retirement plan. That is why I have been a strong supporter of the Equal Treatment of Public Servants Act," Neal, a Massachusetts Democrat, said in a statement. "Our dedicated public employees have paid into Social Security and they are entitled to their full benefits, just like any other worker. I am happy to join with my colleague Congressman Kevin Brady in a bipartisan effort to provide fair and just treatment for our retired public employees."

For more information:

http://www.masslive.com/politics/index.ssf/2015/02/rep_richard_neal_backing_bi-pa.html

What Obama's 2016 Budget Means for States and Localities

The president's budget would be a boon in a host of areas but also includes cuts to popular programs.

President Barack Obama’s record $4 trillion proposed budget would provide boons to states and localities in a host of areas, from infrastructure to education, but the White House’s spending plan again includes cuts or limits to popular programs such as community development block grants.

After calling for an end to “mindless austerity,” Obama released a proposal Monday that would end spending caps on discretionary spending, which are yearly appropriations encompassing nearly every government function, with particular impact for state governments in areas such as education, transportation, veteran’s benefits and natural resource protection. That, combined with a host of new initiatives, would likely mean an influx of state-level spending, but there are some notable cuts or limits.

Some of those have appeared in Obama’s budgets for years, and the Republican-controlled Congress will balk at much of the plan’s spending and tax changes. That means the final product will look far different, if the two branches of government can come to an agreement at all -- a rarity in the Obama era. The budget is for the new federal fiscal year starting Oct. 1.

While the president anticipates the annual budget deficit will dip to $474 billion in 2016 and $463 billion in 2017, it would begin to pick up again, reaching $687 billion by 2025. But as a percentage of the overall economy, that would be lower than current levels of 3.2 percent. The overall national debt -- the accumulation of annual deficits -- would gradually decrease to 73.3 percent of the overall economy because of changes to health care and other areas, the president argued. The budget never reaches balance, which will prompt further criticism from Congressional Republicans.

Much of the items that will get the most attention focus on new tax credits for middle-class families along with new tax increases for some businesses and higher earners. But there’s also much that will directly affect states and cities. The White House budget estimates that federal grants to state and local governments will total $652 billion in 2016, representing a 13 percent increase from 2014.

That’s in part possible because the budget assumes the end of spending caps imposed by the 2011 deficit-reduction deal known as sequestration. Under that deal, spending would have inched up by 1 percent, or $2 billion, from the 2015 fiscal year. The president's budget lifts spending in 2016 by $28 billion, or nearly 3 percent, to $1.17 trillion. The White House budget estimates that sticking with the current caps next year "would mean the lowest real funding level for research since 2002 -- other than when sequestration was in full effect in 2013 -- and the lowest real per-pupil funding levels for education since 2000, a major disinvestment in exactly the areas where investment is needed to support growth. 

Under the new plan, the federal government would spend a total of $333 billion more than originally allotted for discretionary funds over the next decade.

The increased caps for non-discretionary spending -- things like yearly social programs such as Medicare -- may also be a relief for states that been essentially been operating on the assumption that federal appropriations for their programs won't change. Although the president's budget is unlikely to pass as is, a lift on spending caps could end up increasing funding levels for certain grant programs, such as education programs. However, much will depend on decisions in future spending legislation that spells out program appropriations in detail to know the actual impacts.

Here’s a rundown of specific areas the budget would boost -- and specific areas it would cut.

For more information
http://www.governing.com/topics/finance/gov-obama-budget-fiscal-year-2016.html

Obama Budget Rejects GOP Social Security Move

WASHINGTON -- The Obama administration is not playing along with Republican demands to reform the Social Security Disability Insurance program.

In a largely symbolic budget proposal for fiscal year 2016, the White House has called on Congress to shift payroll tax revenue to prevent a looming benefit cut -- a move House Republicans already forbade when they voted on the chamber's rules in January.

The disability trust fund will be depleted next year, resulting in a 19 percent benefit cut for 11 million Americans if Congress does nothing. The remaining 81 percent of benefits would be funded entirely by incoming revenue from payroll taxes. When faced with looming shortfalls in the past, Congress has occasionally bought time by reallocating the amount of payroll revenue going from retirement insurance to disability insurance, or vice versa. 

House Republicans have said reallocating revenue would be "kicking the can down the road," and are demanding instead that Democrats work with them on reforms to the disability program, which Republicans describe as full of waste, fraud and abuse. Sen. Rand Paul (R-Ky.) falsely said in January that more than half of the program's beneficiaries signed up because of anxiety and back pain.

Republicans have not yet proposed reforms to the disability program in the current Congress.

Rep. Sam Johnson, the Texas Republican spearheading Republicans' disability push in the House, labeled the Obama budget a can-kicker.

“With nearly 11 million people counting on the Social Security disability program, kicking the can down the road five years as the President proposes just doesn’t make sense," Johnson said in a statement emailed to HuffPost. "All Americans deserve to hear answers from our President on how he will save the disability program that will go broke before he leaves office."

This story has been updated to include Johnson's comment.

On Monday the White House said lawmakers should go ahead and reallocate funding "while a longer-term solution to overall Social Security solvency is developed with the Congress."

Nancy Altman, co-director of Social Security Works, an advocacy group that opposes benefit cuts, hailed the White House's proposal -- something Social Security advocates have been calling for since last year.

"In light of how economically vulnerable those who receive Social Security DI benefits are, that rebalancing should be enacted sooner rather than later, to avoid frightening those beneficiaries about whether their full benefits will be paid on time," Altman said in an email. "Unfortunately, the House Republicans, through the rule they adopted on the matter on the first day of this Congress, have signaled that they plan to take that must-pass legislation hostage to some set of broader changes -- though have not indicated what those broader changes are."

For more information
http://www.huffingtonpost.com/2015/02/02/obama-budget-_n_6595720.html

Obama Throws Down Gauntlet On Social Security In New Budget

http://talkingpointsmemo.com/dc/obama-fy2016-budget-social-security 

Obama Backs Social Security Spousal Benefits for Same-Sex Couples
President's $4T budget proposal includes a major change to the Social Security Act that would allow same-sex couples to receive spousal benefits even if they live in states that don't recognize such unions

President Barack Obama's $4 trillion budget proposal includes a major change to the Social Security Act that would allow same-sex couples to receive spousal benefits even if they live in states that don't recognize such unions.

Under current law, gay couples who move from one of the 36 states that permit same-sex marriage to one that does not lose the Social Security benefits heterosexual couples enjoy.

“Under this proposal, such married couples would have access to these benefits,” according to the budget.

For more information
http://www.investmentnews.com/article/20150203/FREE/150209978/obama-backs-social-security-spousal-benefits-for-same-sex-couples?NLID=daily&NL_issueDate=20150203&utm_source=Daily-20150203&utm_medium=in-newsletter&utm_campaign=investmentnews&utm_term=text

(Opinion) The Problem With Obama's Plan to Limit Retirement Savings -

The administration's plan to cap retirement saving at about $3 million adds a new layer of complication and little benefit 

The White House releases its 2016 budget today, and among other initiatives aimed at raising tax revenue from the richest of the rich, the Obama administration is proposing a cap on how much money a person can have in all of her retirement accounts combined. It suggests a ceiling of more than $3 million per person.

The vast majority of Americans will only ever dream of such a well-padded retirement. Even most of the rich wouldn't hit Obama's cap. In 2011, only one out of every 1,000 Americans had more than $3 million in their retirement accounts, according to the Employee Benefit Research Institute. But it's not clear how that number will change in the future. 

The administration says it wants to "prevent additional tax-preferred saving by individuals who have already accumulated tax-preferred retirement savings sufficient to finance an annual income of over $200,000 per year in retirement—more than $3 million per person." In other words, it reverse-engineered the cap, figuring out how much it would cost to buy an annuity that generates more than $200,000 in annual income. That's great—today. Annuity prices vary with interest rates because insurance companies buy bonds to finance payouts. When bond yields are low, as they are now, annuities are more expensive. Right now a 10-year Treasury bond yield is just 2 percent. If it jumps to 5 percent (the rate in 2006), that $205,000 annual annuity would only cost $2.2 million.

Now it's not clear whether the cap will actually vary with interest rates. If it did, and rates did jump to 5 percent, the proportion of retirees affected would grow from 1 in 1,000 to 30 in 1,000, EBRI estimates. In that scenario, those people would suddenly have to pay taxes on their retirement accounts. If rates went down again, they could contribute more and avoid taxes. That makes retirement planning and the tax code even more complicated than it already is, and opens the door to more loopholes and tax dodges.

Keeping the cap at $3.4 million, or indexed to inflation, may seem more reasonable. But then the cap is arbitrary and hardly has any impact. There's already a limit on how much people can contribute to these accounts each year ($53,000 for a 401(k), including employer match; $5,500 for an IRA if you are not self-employed and under 50). These limits make it nearly impossible to have tens of millions of dollars in retirement accounts anyway.

For more information
http://www.bloomberg.com/news/articles/2015-02-02/the-problem-with-obama-s-plan-to-limit-retirement-savings

Obama's Retirement Cap Might Sound Good but It has an Annuity Problem
When interest rates rise, the $3.4 million ceiling proposed could drop, trapping more people in a tax net
http://www.investmentnews.com/article/20150202/FREE/150209992/obamas-retirement-cap-might-sound-good-but-it-has-an-annuity-problem?NLID=daily&NL_issueDate=20150202&utm_source=Daily-20150202&utm_medium=in-newsletter&utm_campaign=investmentnews&utm_term=text

President Obama Proposes More Retirement Plan Access, Cap on Tax Savings
http://www.pionline.com/article/20150202/ONLINE/150209980&utm_source=friend_refer&utm_medium=email&cslet=UnhOY2lLSDlMZktlK2lvK3VyL0dPTzlxbys3aHNXekhNTE09

Obama's Retirement Proposals "Punish" Investors: ICI
http://news.investors.com/investing/020515-738002-obama-measures-would-create-savings-caps-employer-mandates.htm

General Explanations of the Administration’s Fiscal Year 2016 Revenue Proposals
Department of the Treasury Report
http://www.treasury.gov/resource-center/tax-policy/Documents/General-Explanations-FY2016.pdf 

Managing the Cost of Government New Tools for the New Normal

In September 2014, Governing hosted its annual Cost of Government Summit, which convened government leaders to discuss the fiscal challenges their states and municipalities face, their biggest cost drivers, threats they see on the horizon, and potential solutions to combat these challenges and create a more efficient and cost-effective government.

Download this report to find out where states and localities see rising expenses and the approaches innovative governments are taking to bend the cost curve in their favor and continually serve constituents without breaking the bank.

For more information:

http://www.governing.com/papers/Managing-the-Cost-of-Government-New-Tools-for-the-New-Normal-941.html?promo_code=Newsletter_BannerAdAndTextCombo_ThumbnailPlusText_Governing

Why Some Pensioners Worry About Risk Transfers

A case heard in federal appeals court this week asks whether increasingly common pension risk transfer moves by large corporate plan sponsors are putting retirees at increased risk.

A three-judge U.S. court of appeals panel heard oral arguments February 4 in the class action Lee v. Verizon (Case No.  14-10553), a case regarding the transfer of 41,000 Verizon retirees' pension accounts into a single group annuity sponsored by Prudential Insurance Company.

The pension risk transfer move has already been approved by a district court, based in part on the plaintiffs’ inability to prove real harm occurred as the result of the risk transfer. An earlier opinion issued by Chief Judge Sidney A. Fitzwater of the U.S. District Court for the Northern District of Texas, Dallas Division, cited multiple reasons for the dismissal including the plaintiffs' failure to prove that Sections 102(b), 404(a) and 510, as well as Section 409(a), of the Employee Retirement Income Security Act (ERISA) were violated. At the time, Fitzwater stated that while he was dismissing the case, his opinion did not prohibit the plaintiffs from repleading their case in the future, leading to the current appeal.

The main worry of retirees is that their billions of dollars in income annuities won’t be as well protected as ERISA-covered benefits, for example in the case of a personal bankruptcy or the admittedly unlikely bankruptcy of Prudential. The plaintiffs further claim they received insufficient notice in advance of the transfer of their promised pension benefits from Verizon’s to Prudential’s balance sheet, and that no such right to enact a transfer was established by plan documents.

For more information
http://www.plansponsor.com/Why_Some_Pensioners_Worry_About_Risk_Transfers.aspx