Presentation on theme: "Maine Public Employees Retirement System October 3, 2013 presentation for Maine Municipal Association- Retirement Trends."— Presentation transcript:
Maine Public Employees Retirement System October 3, 2013 presentation for Maine Municipal Association- Retirement Trends
Retirement System Benefits 1 Defined Benefit Retirement Plan 2 Survivor Benefits 3 Disability Retirement 4 Group Life Insurance 5 Defined Contribution Plan
Pension News Across the Nation Public pensions are a continuing hot topic Comparison is to the private sector which continues to move to defined contribution plans Notable public pension plan problems spreads doubt about all public plans Illinois Detroit Bad sound bites resonant more than good sound bites Common assumption is that all public pension plans are broken, will create bankruptcies, and need to be fixed Are these just difficult times or do these plans need fixing?
Pension News Across the Nation Pensions in the News Example - Morningstar*: Funding ratios continued to drop in 2012 Aggregate funding of 50 states and Puerto Rico was 72.6% High State - Wisconsin at 99.9% Low State - Illinois at 40.4% Puerto Rico lowest of all with aggregate of 11.2% funding Maine (State/Teacher) – 77% PLD – 87% How accurate are the numerous reports of funding status? There are two primary reasons these reports are not accurate: Each plan uses its own assumptions and investment risks, i.e. there is no direct one-to-one comparison Even when one-to-one comparisons are created they are controversial because there is no agreed upon accurate way to measure assets and more importantly liabilities *Source: P&I Plan Sponsor Digest, Morningstar article
Pension News Across the Nation Pensions in the News Whats in the future for public pension plans? Continued scrutiny Continuing plan changes/modernization across the country Possible first-time regulatory changes GASB (more to follow in this presentation) Possible mandatory Social Security participation Introduction of federal laws (Orrin Hatch) Other changes affecting public plans Moodys standardization of actuarial assumptions for bond ratings Society of actuaries studying how plan liabilities should be reported How will these affect Maine and the PLD Plan? GASB changes will change how liabilities are reported Moodys calculation of pension liabilities might/might not affect bond ratings of governmental units Possible continuing changes that are adopted over time based on efforts like GASB, Moodys, and Society of Actuaries
Pension News Across the Nation Pensions in the News Since the 2008-2009 market down turn most states have made changes to their plans, including increasing employee contribution rates.* Most States employee contribution rates are between 4 – 8% Since 2009, 28 states have increased employee contribution rates Maines PLD employer rates range from 3 – 8%. All plans are scheduled to have employee rate increases in July 2014 of.5% each year for 3 years Nationally, 25 – 30% of employees of state and local government do not participate in Social Security Maine's state employees and teachers do not contribute to Social Security. Approximately 50% of Maines PLD members have Social Security coverage. *NASRA Brief- January 2013
Whats New? Changes to GASB Reporting Legislative Changes to the PLD Program
GASB Statement No. 68 Whats Changing? A Lot! Financial reporting for governmental employers providing pension plans to employees – Specifically the way liabilities are reported Non-employer governmental entities – Special funding situations Calculation of Net Pension Liability Calculation of Net Pension Expense Possible use of a blended discount rate
GASB Statement No. 68 What is MainePERS Role? Provide your financial and demographic data to the actuary Provide timely information to you (employers) – Individual or proportionate share of Net Pension Liability – Individual or proportionate share of Pension Expense – Information required for your disclosures and supplemental schedules Address any questions you have about the information we provide
GASB Statement No. 68 What is Your Role? Understand the reporting requirements for the type of pension plan you provide – Statement of Net Position – Statement of Changes in Net Position – Required notes and disclosures – Required supplemental information and related disclosures Consult with your auditors Choose a measurement date Implement the changes for your fiscal year beginning on or after June 15, 2014
The Road to Modernization MainePERS Participating Local District Consolidated Plan October 2013
Definitions You Might Need PLD- Participating Local District Consolidated Plan- MainePERS Retirement Program available for Maine local districts to adopt for employees COLA- Cost-of-Living-Adjustment AFC- Average Final Compensation Creditable Service- Service credit under MainePERS used in the calculation of retirement benefits NRA- Normal Retirement Age. The age at which a regular plan member can retire without a reduction in benefits due to age.
Why are we changing? The times we are living in are changing; our plan needs to keep up. We are working and living longer State & local budgets everywhere are being squeezed – what used to be standard benefits are changing The 2008 market crash reduced the PLD Plan funding level to 87% as of 6-30-2012
For New Members to the Plan Age 65 Normal Retirement Age (NRA) Effective date July 1, 2014 Early retirement age reduction factor Age reduction of 6% will be applied to benefits for each year a member is younger than age 65 at retirement Effective date July 1, 2014 What are the Legislative Changes?
For All Members of the Plan Future COLAs will be capped at 3% instead of 4% Effective date 2014 COLA Eligibility at 12 months instead of 6 months Effective September 2015 Employee contribution rates Once employer rates return to an aggregate of 8% (in FY 2015), employee contribution rates will begin to increase at.5% per year for a total of a 1.5% increase until such time as employer rates are reduced What are the Legislative Changes?
Whats the Bottom Line? These changes bring the contribution rates closer to paying for the current plan costs PLD Advisory Committee will continue to monitor the plan to keep it healthy
PLD Advisory Committee Members Member:Nominated By: David Barrett Maine Municipal Association Vacant, awaiting appointmentAppointed by Governor Steven Butterfield Maine State Employees Association Rick Cailler Professional Firefighters of Maine Rob Walker Maine Education Association John Eldridge Maine Municipal Association Traci PlaceTeamsters Union Local #340 Janice KimballMaine Municipal Association Cornelia BrownMaine School Management Association Sylvia HebertAFSCME, Council 93 Dr. Thomas J. WardMaine School Management Association Sandy Matheson, Maine Public Employees Retirement System Executive Director Ex-officio