Colorado Senate approves landmark pension reforms
Senate backs pension overhaul
Denver
Post February 1, 2010
DENVER—Colorado is moving to become the first state to cut
retiree benefits to prevent its pension system from going broke.
The state Senate voted 25-10 on Monday to back a proposal to overhaul the Public Employees Retirement
Association, sending it on to the House.
Without
any changes, the pension system, which covers 450,000 state workers, teachers and local government employees as well as lawmakers
is on course to go broke within 20 years. The overhaul plan brokered by the top Democrat in the Senate, President Brandon
Shaffer, and the top Republican, Minority Leader Josh Penry, is aimed at making it solvent within 30 years, largely by cutting
benefits.
"The problem is so huge
it could swamp the entire state," Penry said of why he offered to work with Shaffer on a bipartisan fix.
The plan is also backed by Democratic Gov. Bill Ritter.
Under the proposal (Senate Bill 1), retirees
would get no cost of living increase this year instead of the normal 3.5 percent increase, which would save PERA $80 million.
Next year they would get the lesser of inflation or 2 percent and, after that, annual increases could be no higher than 2
percent.
Backers want to pass the bill
before March, when PERA would have to issue its normal cost of living increases.
The retirement age for new employees would rise from 55 to 60, and contributions would
increase for both employees and their government employers.
Ron Snell, director of state services at the National Conference of State Legislatures, said Colorado is
the only state he's aware of that is trying to cut retiree benefits to save its pension system. In recent states, he said
at least four others have increased contribution rates to shore up their funds—New Mexico, Iowa, Nebraska and New Jersey.
PERA is suffering partly because of the
recession. Its assets fell from $41.4 billion in December 2007 to $29.5 billion in July 2009 although PERA estimates that
it will have a 15 percent rate of return when all its investments are counted from 2009.
Sen. Greg Brophy, one of just three Senate Republicans to vote with Penry
on the plan, said that lawmakers are also to blame for previously increasing benefits, including several changes made when
the economy was booming in the late 1990s.
All Senate Democrats voted for the PERA fix. Ten Republicans voted against it. Some wanted to prevent existing retirees
from losing benefits. Others wanted to go further and allow more new employees to be offered a 401(k)-style defined contribution
plan.
Brophy said the state has to come
up with a way to pay workers who have already contributed into the pension system or face a $10 billion hit to the state budget.
"The D.C. plan is not only a deal breaker, it's a budget breaker," he said.
Audio excerpt of Colorado Senate
Finance Committee testimony of Meredith Williams and CO PERA staff
http://www.nasra.org/resources/SFC_01-26-10.mp3
Dana Bilyeu warns that state employee layoffs may harm
Nevada PERS
State employees facing layoffs might retire, hurt PERS assets
LAS VEGAS REVIEW-JOURNAL February 1, 2010
CARSON CITY -- Massive layoffs of state employees could induce many long-term workers to retire and potentially
hurt the assets of the Public Employees Retirement System, its top official said Friday.
"There might be a lot of retirements," if the state lays off thousands of employees, PERS executive officer
Dana Bilyeu said. "I don't know yet what will happen. It is an open question."
She said state government has an older work force, and some might retire early to ensure they have an adequate source
of income.
Gov. Jim Gibbons plans to call the Legislature into a special session to deal with sagging tax revenues.
Employee representatives have said laying off workers, cutting pay and reducing or eliminating some programs are his most
likely options.
PERS has $22 billion invested to pay for retirement for its 40,000 retirees and 104,000 active members, which
include local government employees, teachers and state government employees.
The money now covers
72.5 percent of what PERS estimates will be needed to pay their retirement costs, down from a peak of 83.4 percent.
Under a long-term plan which has 26 years remaining, the retirement rate paid by government and employees,
now 21 percent of their gross wages in most cases, can be increased periodically until 100 percent of the long-term liabilities
are met.
Bilyeu said increased retirements would have more of an effect on PERS' assets than laid-off workers
withdrawing their share of what they have contributed to the agency for retirement.
That
is because more than 80 percent of public employees in Nevada participate in what is called "employer-pay" retirement.
Instead of paying half the costs of their retirement like private employees do with Social Security, employer-pay workers
contribute nothing directly to PERS and cannot withdraw funds if they are laid off.
Employer-pay
employees have agreed in advance to have their gross pay reduced by the amount that they otherwise would have paid to PERS.
The state or local government pays that money into the retirement system.
But public employees under the "employee-pay" system can request a return of what they paid for retirement
if they are laid off. Those employees directly pay their half of retirement costs to PERS.
Bilyeu figures most of them would decide against withdrawing this money since those with more than five years of service
are vested and ultimately will receive retirement benefits when they reach retirement age.
New Hampshire
pension reform proposals include 50-year asset smoothing
Bills target state retirement system costs
Sunday,
January 31, 2010
CONCORD — Most bills filed this year seeking to improve the state retirement system already have died
a quick death in the House. But two filed by State Rep. Neal Kurk, R-Weare, are still alive, and he says they could yield
healthy long-term dividends for state coffers if they are passed into law.
Kurk's House Bill 1530 would ensure
base pay is used to calculate retirement benefits, preventing workers from "padding" salaries.
He said
there have been many instances over the years in which state, municipal, county and school employees padded their base salaries
by, as they were nearing retirement, using pay from special details, overtime, and compensation for unused vacation, sick
or personal time they were allotted, increasing the amount they earned. The full amount then would be used to calculate pensions,
potentially greatly increasing retirement payments for life.
Under Kurk's proposed bill, retirement benefits
would be calculated only on a public employee's highest level of base salary at the time they retired, Kurk said.
Besides what he believes could amount to significant long-term savings for the state system, Kurk said his bill would also
restore the public's faith that public servants are not being overcompensated. "We set up the pension system so people
could have enough to live on after retirement," he said, "not to let someone have the same amount of pay when they
retired."
Under the current system, he said, some public employees are walking away with 80, 90 or even 110
percent of their base salaries when they began collecting monthly pension benefits. "That is not good public policy,"
said Kurk, a member of the House Finance Committee.
He also filed HB1682, which would require the state retirement
system to use a 50-year period for averaging retirement system earnings and assets in preparing its biennial valuation. That
valuation is used to determine annual contribution rates required of employers, including cities and towns.
Currently,
Kurk said, the system requires actuarial firms to review the rates every five years to determine if the contributions being
made by cities, towns, counties, school districts and state employers are sufficient to support the benefits. By extending
the actuarial period well beyond the five-year cycle, the system would have a more stable rate structure, Kurk said.
Cities and towns that currently are looking at sharp rate increases beginning in July 2011 and 2012 would not end up being
forced to make such high payments, he said.
Whether in prosperous or lean economic times, he said, a 50-year valuation
window would not decrease or increase contribution rates that much. It would also allow the state to avoid severe shortages
in retirement system funds in the future.
The overall health of the state retirement system remains a key issue
for lawmakers this year.
According to the retirement system's annual financial report, which is posted online
at nhrs.org, the system's funded ratio of the pension plan stood at 58.3 percent in 2009, down from 67.8 percent in 2008.
An independent auditor's report filed by Boston-based KPMG LLP in December showed the system's net assets decreased
by $1.135 million from the prior year, and net investment income declined by $995.2 million in 2009.
Meanwhile,
employer contribution rates in fiscal year 2009 increased to $261.5 million, 4.6 percent higher than 2008. Benefits paid during
fiscal year 2009 were $510 million, 14.6 percent higher than benefits paid in 2008.
Ken Alberts of Gabriel, Roeder,
Smith & Company, the retirement system's actuarial firm, told the system's board of directors in November that
employer rates would have to be increased by 11.4 to 31.1 percent in fiscal years 2012 and 2013 to make up an 18 percent decline
in investment revenue.
More than 51,000 state employees, firefighters, police officers and teachers are retirement
system members. About 24,000 retirees receive monthly pension benefits.
Two other pieces of legislation that deal
with the retirement system are being retained by the House Executive Departments and Administration Committee.
One,
HB1681, sponsored by Rep. Charles Weed, D-Keene, would allow education support personnel to participate in the system. It
would also force school districts to pay for state retirement benefits for those employees.
The other, HB1428,
sponsored by Rep. Patricia McMahon, D-North Sutton, would ensure surviving spouses of deceased state employees would continue
to receive pension and health insurance benefits.
Several House bills pertaining to the retirement system already
have been killed. For example, Rep. Ken Hawkins, R-Bedford, sponsored HB401, which would have reduced the system's board
of directors from 14 to eight members, all appointed by the governor and Executive Council.
Hawkins said the House
Executive Departments and Administration Committee killed his bill last year, but he brought it back again this year, when
it was killed again.
He said the current board is too political because eight of its members represent Group I
and Group II employees and are appointed by state employee unions that represent firefighters, police officers and teachers.
He said the possibility exists that every member on the board also could be a retirement system member.
He said
he believes the state would be better served if the governor and Executive Council were able to appoint people with strong
investment and financial expertise.
Although his bill has been killed twice, he said he is glad he has been able
to bring it back. "At least we're trying to get people to understand what's going on," he said.
Other bills that met a quick death in the House included HB617, sponsored by Rep. Jill Hammond, D-Peterborough, which would
have let small businesses and nonprofit groups join the retirement system. It was killed in 2009 and again this year.
HB673, sponsored by Rep. Candace Bouchard, D-Concord, would have let cities, towns and counties withdraw from the state
retirement system or withdraw a portion of their public employees, such as new hires. That bill was also killed in the House.
Barbara Reid, who serves as the government finance adviser for the New Hampshire Municipal Association, said her group
testified in favor of this bill in 2009 because it would give members flexibility to decide what level of benefits they wanted
to offer employees. She said it would only affect new hires, not any public employee who was already in the system and vested.
Controversy surrounds salary of Massachusetts municipal
pension director
Big raises, perks for pension board chief
Unique deal ties
salary of retirement director to pay for town managers
By Chris Cassidy
STAFF WRITER
The executive
director of the retirement board that controlled municipal pensions for most local towns saw his annual salary rise 52 percent
over the last six years, thanks to an unusual clause inserted into his contract.
Timothy Bassett,
whose role as board chairman is being investigated by a state agency, signed a new contract in 2006 that opened the door to
tens of thousands of dollars in raises at the expense of taxpayers.
The unique deal directly tied
Bassett's pay to the salaries of highly compensated town managers.
Specifically, it guaranteed Bassett
would be paid either $110,000 per year or the average of the salaries of the two highest-paid town managers within the Essex
Regional Retirement System — whichever is greater. Locally, the ERRB oversaw pensions for Salisbury, Newbury, Rowley,
Georgetown, West Newbury, Merrimac and Groveland, as well as the Triton and Pentucket regional school districts.
The
board had come under intensifying scrutiny for posting the worst returns of any retirement board in the commonwealth in 2008.
As
a result of the unique contract clause, Bassett's salary skyrocketed in recent years. In 2003, before the new contract
took effect, he was making $88,515; by 2009, he was up to $134,250 — an increase of 51.7 percent over six years.
"I've
never heard of anything like that before," said Geoffrey Beckwith, executive director of the Massachusetts Municipal
Association. "It's highly unusual that a salary would be pegged to a decision made by other government agencies."
The
contract also allows the board to grant him additional raises and fringe benefits, and guarantees a $3,000 yearly stipend
for his dual responsibility as board chairman.
Bassett's special provisions came to light after The Salem
News, the sister paper of The Daily News, obtained copies of his two most recent contracts earlier this week.
His
handsome raises have catapulted him past the salaries of other county retirement board administrators, many of whom oversee
much larger investments and many more retirees than Bassett.
Bassett heads a system with 5,000 members
and $209 million in assets (which are in the process of being transferred into the state system). By comparison, Plymouth
County Retirement Board administrator William Farmer looks after $491 million in assets for the board's 12,000 members.
He is paid $9,000 less than Bassett.
Bassett's pay even outpaces those at the state level.
Nick
Favorito, the board administrator for the State Retirement Board — which handles benefits for 136,000 state workers
— is paid $117,300 a year.
While Bassett has been enjoying the kind of pay deal that most workers only dream
of, he has also secured a variety of other perks for himself.
In 2004, the board awarded him a lucrative,
$500,000 retirement benefit. They began setting aside an additional $83,400 a year for him in a trust. When he retired at
age 65, he would have had an annuity that paid him $40,000 a year for the life of the account — up to a half-million
dollars.
That was to supplement the $41,000-a-year state pension he has been collecting since he "retired"
from the State Land Bank about 15 years ago.
However, Bassett declared last year that he would no longer
accept the annuity, citing "market conditions" and "the economic realities facing cities and towns."
Still,
Bassett has enjoyed other comfortable benefits. He gets five weeks' vacation and an initial reserve of 62 sick days, plus
an additional 15 sick days a year.
He even has a protection clause. If the Essex Regional Retirement Board is abolished,
his contract guarantees that within 60 days, he'll be handed a severance package equal to his annual salary for the remaining
term of his contract (Dec. 16, 2012) or his 65th birthday, whichever time is greater.
The opportunity
to travel to far-flung resorts became another cushy perk for Bassett and other board members. In 2005, Bassett, Glenn Morse
and Kathy O'Leary flew to Las Vegas for a national public retirement conference, where they stayed at the Mandalay Bay
Resort and Casino and dined at Emeril Lagasse's Delmonico Steakhouse. Total cost of the trip: $7,015.
Bassett
also attended a Washington, D.C., conference in 2006, where he stayed in a $339-a-night room at the Hyatt Regency, just two
blocks from the Capitol.
No one on the retirement board wanted to defend Bassett's contract this week.
O'Leary and Morse didn't return messages left at their homes. William Martineau and Roberta Josephson declined to
comment. Bassett hasn't returned phone calls left at his Danvers office over several days.
Meanwhile,
Beckwith, the head of the Massachusetts Municipal Association, questioned why the salary of a retirement board director would
be so closely tied to that of a town manager when their job responsibilities are vastly different.
"Town
managers and mayors oversee hundreds of employees and deal with issues ranging from public safety and public works to immediate
reaction to crisis," he said.
"It's the 24/7 nature of the position," he said. "Just think
about what happened in Danvers. The town manager is the one responsible for coordinating the response and effort. "That
would never be the case with the administrator of a retirement board." comparing retirement directors' salaries
Retirement Board
Administrator Salary Assets (in
millions) Membership
Essex Regional
Timothy Bassett $134,250
$209.1 5,000
Worcester Regional
Kevin Blanchete $130,300
$301.4 13,000
Plymouth County
William Farmer
$125,000 $491.1
12,900
State Retirement Nick Favorito
$117,300 $15.4 billion 136,097
Bristol
County John Walsh
$105,000 $329.5
6,300
Middlesex County Jacqueline Williams* $102,656
$597.7 17,126
Hampden County
Julianne Bartley
$74,263
$173.2 4,500
* Tom Gibson is
the board's chairman-treasurer, who also serves as legal counsel, and receives a salary of $132,300.
Source:
Individual retirement boards and Public Employee Retirement Administration Commission
Massachusetts county DA sues municipal pension board over
Open Meeting Law violations
DA files suit against retirement board Violations of state's
Open Meeting Law cited
Salem News February 3, 2010
The Essex County
district attorney's office filed suit yesterday against the Essex Regional Retirement Board charging violations of the
state's Open Meeting Law. In an unusually harsh response to the alleged wrongdoing, the complaint asks a court to nullify
the retirement board's re-election of Chairman Timothy Bassett, along with any actions it took during a closed-door meeting
on Jan. 25.
An odd string of events that day eventually led to a late-night letter the board sent to the
state commission that oversees public retirement boards. In it, members asserted that with all of them present at a "regularly
scheduled" meeting, they unanimously voted to reappoint Bassett, retroactive to Dec. 31, 2008. That date is when they
were legally required to take the vote, but never did.
Bassett did not return a call seeking comment.
The
Public Employee Retirement Administration Commission had already determined that Monday's vote, legal or not, was meaningless,
and the state board of overseers must name a successor — who could be Bassett or someone else — at a Feb. 16 meeting.
The
lawsuit, which is signed by Assistant District Attorney Charles Grimes, acknowledges that an 8:30 a.m. meeting at the board's
office in Danvers on Jan. 25 was properly posted. At what appeared to be the end of that meeting, the board went into executive
session to discuss what were referred to as "legal matters."
First violation: That is not one
of the few exemptions that allow governmental bodies to meet outside public view.
Second violation:
Grimes concluded the board violated another provision of the law by not announcing whether they intended to return to open
session when the executive session ended.
Any actions taken during that session should therefore be set
aside, Grimes wrote.
He also argues that since the board did not discuss Bassett's re-election during
its open session, could not do so behind closed doors and could not hold a second public meeting without notice, the election
result should be tossed out.
Furthermore, while four board members — all but Bassett — signed a
fax sent to the Public Employee Retirement Administration Commission at 11:22 p.m. that same Monday, Grimes concluded that
member Katherine O'Leary had not attended the morning meeting, which was the only legitimate meeting the board convened
that day.
This is not the first time the retirement board has been accused of violating the Open Meeting
Law.
Last summer, Grimes chided the board for its long-standing failure to post public notice of its
meetings. Then he cited them for preventing members of the media from attending its meetings in two separate instances.
References
to the law and directions for boards to straighten up are the usual consequences for violations of the Open Meeting Law. It's
unusual for the district attorney to take legal action, but District Attorney Jonathan Blodgett indicated this case merited
the decision.
"This is the board's third violation of the law in a little more than seven months,"
Blodgett said in a prepared statement. "What they all have in common is that they affected public access to its meetings."
Boxford
Town Administrator Alan Benson wasn't surprised Blodgett came down so hard. "The lack of transparency of this board
has been especially egregious," he said. "The very basics of the law have been ignored for a long time."
Middleton
Town Administrator Ira Singer filed one of the complaints that led to last year's ruling by the district attorney's
office. The Salem News filed the other, and also filed the complaint that led to yesterday's lawsuit.
GFOA issues “Best Practices”
on public retirement administration, including sustainable funding practices
Excerpt from http://www.gfoa.org/:
A GFOA
best practice identifies specific policies and procedures as contributing to improved government management. It aims to promote
and facilitate positive change rather than merely to codify current accepted practice. Partial implementation is encouraged
as progress toward a recognized goal.
Access the GFOA Committee on Retirement and Benefits Administration’s
best practices here:
http://www.gfoa.org/index.php?option=com_content&task=view&id=124&Itemid=136
Opinion: Social Security’s cash shortfall this year is a watershed event
Social Security could be next to need a bailout
By Allan Sloan
Washington Post Tuesday, February 2, 2010; A13
Don't
look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security
system.
A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than
it is spending on benefits.
Instead of helping to finance
the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury
to keep benefit checks from bouncing -- in other words, a taxpayer bailout.
No one has officially announced that Social Security will be cash-negative this year. But you can
figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO
issued last week.
The first number is $120 billion,
the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is
$92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).
This means that without the interest income, Social Security will be $28 billion in the hole this
fiscal year, which ends Sept. 30.
Why disregard the
interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that
the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any
cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance.
Social Security hasn't been cash-negative since the early 1980s,
when it came so close to running out of money that it was making plans to stop sending out benefit checks. That led to the
famous Greenspan Commission report, which recommended trimming benefits and raising taxes, which Congress did. Those actions
produced hefty cash surpluses, which until this year have helped finance the rest of the government.
But even then, it was clear the surpluses would be temporary. Now, years earlier than projected,
Social Security is adding to the government's borrowing needs, even though the program still shows a surplus on paper.
If you go to the aforementioned pages in the CBO update
and consult the tables on them, you see that the budget office projects smaller cash deficits (about $19 billion annually)
for fiscal 2011 and 2012. Then the program approaches break-even for a while before the deficits resume.
Social Security currently provides more than half the income for a majority of retirees.
Given the declines in stock prices and home values that have whacked millions of people, the program seems likely to become
more important in the future as a source of retirement income, rather than less important.
It would have been a lot simpler to fix the system years ago, when we could have used Social
Security's cash surpluses to buy non-Treasury securities, such as such as government-backed mortgage bonds or high-grade
corporates that would have helped cover future cash shortfalls. Now it's too late.
Even though an economic recovery might produce some small, fleeting cash surpluses, Social
Security's days of being flush are over.
To be
sure -- three of the most dangerous words in journalism -- the current Social Security cash deficits aren't all that big,
given that Social Security is a $700 billion program this year, and that the government expects to borrow about $1.5 trillion
in fiscal 2010 to cover its other obligations, about the same as it borrowed in fiscal 2009.
But this year's Social Security cash shortfall is a watershed event. Until this year,
Social Security was a problem for the future. Now it's a problem for the present.
Allan Sloan is Fortune magazine's senior editor at large.
Press release: At inaugural NIRS conference, Putnam Investments
CEO calls for retirement reforms and Social Security reform commission
Putnam Investments CEO Reynolds Urges Action - This Year - to Strengthen All of America's Retirement
Savings Systems
February 2, 2010
BOSTON--(BUSINESS WIRE)--Speaking at the National Institute on Retirement
Security in Washington, D.C. today, Robert L. Reynolds, President and Chief Executive Officer, Putnam Investments, urged Congress
and the Obama administration to launch a comprehensive effort this year to strengthen all of America’s retirement savings
systems, public and private.
Reynolds called for the
establishment of a bipartisan commission to deliver an action plan to make Social Security solvent by the day after the 2010
election — to generate a more thoughtful, less polarizing outcome. Additionally, Reynolds urged Congress to concurrently
extend workplace savings coverage to all American workers, make all existing workplace plans more automatic and support robust
competition among lifetime income solutions — both annuities and non-annuity variants.
In his remarks shared at the industry event, Reynolds noted that if no action is taken
soon, today’s retirement savings status quo threatens to inflict severe financial stress on future generations of retirees
— even to pay for food, housing and medicine. “Americans know we need to transition our country away from debt
and leverage, moving toward a greater reliance on savings, investment and new business formation to reboot sustainable economic
growth.” Reynolds continued, “Creating a robust, resilient and truly secure public and private retirement system
should be at the heart of that effort.”
Solving
America’s retirement savings challenge calls for new alliances and collaboration between political parties, social groups,
financial industries and private industry explained Reynolds. “We’re all in this together,” he noted, “Democrats
and Republicans, wealthy, middle-class and lower-income, public and private sectors. This is not something one party or industry
can solve. This is an American challenge we need to meet.”
Reynolds, a 30-year veteran of the retirement savings industry, suggested that retirement reform should include the
following key elements:
Make Social Security
Solvent:
- Appoint a bipartisan
commission to develop a compromise plan to make Social Security solvent and deliver it to Congress by November 3, 2010.
- The
plan should not include an increase in payroll taxes, and it must ensure that the retirement benefit levels of lower-income
Americans be maintained. All other steps to enhance solvency should be open for compromise.
Extend Access to Workplace Savings Plans to All Workers
- Offer the 78 million Americans, roughly half the country’s work force, who do not have
a workplace saving plan coverage through either a universal IRA or a significantly simplified low-cost version of the 401(k)
plan or both.
- Among existing workplace plans, speed the implementation of the core elements of the Pension
Protection Act of 2006 including automatic enrollment, savings escalation, and guidance to qualified default investment options.
These elements should be made mandatory.
Build
in Lifetime Income Options
- Create an optional national insurance
charter and a new regulatory body empowered to approve, or deny approval to, qualified lifetime income products including
annuity and non-annuity products.
- Create a new lifetime income security fund, comparable to the FDIC in
banking, to back up lifetime income guarantees from insurers whether offered “in-plan” or as choices people make
when rolling over from a workplace savings plan to individual accounts.
- Require all workplace savings plan
providers to offer such options to all employees, but leave employees free to choose or reject lifetime income options.
- Provide
strong tax incentives to employees who invest in insured lifetime income products, since converting life savings into lifelong
income is even more challenging than accumulating a nest egg.
- Provide strong legal protection to employers
who offer automatic enrollment, as well as access to advice, guidance and lifetime income guarantee products in their savings
plans.
“Ensuring the solvency of the Social
Security system and extending the workplace savings system to nearly all working Americans, not just half, are the best ways
to tackle America’s retirement challenge and raise America’s national confidence,” Reynolds suggested. “If
we move this year — and finish the job in 2011, we can genuinely solve this issue. Future generations of working Americans
could then feel more secure and more empowered in their work lives: more willing to change jobs, learn skills, start a business,
or pursue a dream. And we Americans could show the world — and ourselves — that we can control our destiny. That’s
a goal worth struggling for, and 2010 is the year to start making it a reality.”
<snip …>
News Release: Departments of Labor
and Treasury announce publication of request for information on enhancing retirement security
EBSA
News Release: [02/02/2010]
Contact Name: Gloria Della or Joseph De Wolk
Phone Number: (202) 693-8664 or (202) 579-7359
Release Number: 09-1571-NAT
WASHINGTON —
The U.S. Departments of Labor and the Treasury today announced the publication of a request for information (RFI) soliciting
public comments to assist the agencies in determining what steps to take to enhance retirement security for workers in employer-sponsored
retirement plans through lifetime annuities or other arrangements that provide a stream of income after retiring. The RFI
appears in today's edition of the Federal Register.
"Today's initiative is particularly
important given the shift from defined benefit plans that offer employees lifetime annuities to 401(k) and other defined contribution
plans that typically distribute retirement savings in a lump sum payment," said Phyllis C. Borzi, assistant secretary
for the Labor Department's Employee Benefits Security Administration.
The RFI seeks comments
on a broad range of topics, including:
- The advantages and disadvantages of distributing benefits as a lifetime stream
of income both for workers and employers, and why lump sum distributions are chosen more often than a lifetime income option.
- The type of information participants
need to make informed decisions in selecting the form of retirement income.
- Disclosure of participants' retirement income in the form of account balances
as well as in the form of lifetime streams of payment.
- Developments in the marketplace that relate to annuities and other lifetime income options.
Written comments responding to the lifetime income RFI may be addressed to the U.S. Department of Labor,
Office of Regulations and Interpretations, Employee Benefits Security Administration, N-5655, 200 Constitution Ave. NW, Washington,
DC 20210, Attn: Lifetime Income RFI. The public also may submit comments electronically by email to E-ORI@dol.gov or through the federal e-rulemaking portal at http://www.regulations.gov.
President Obama’s retirement
security proposal includes establishment of auto-IRAs and 401(k) reforms
Excerpt from undated White House Fact Sheet, accessible here: http://www.whitehouse.gov/sites/default/files/Fact_Sheet-Middle_Class_Task_Force.pdf
RETIREMENT
SECURITY
Establishing
Automatic IRAs. Currently, 78 million working Americans—roughly half
the workforce—lack employer-based retirement plans. Fewer than 60 percent of working heads of families were eligible
to participate in any type of job-related pension or retirement plan in 2007. The Obama-Biden Administration will promote
the establishment of a system of automatic IRAs in the workplace by requiring employers who do not currently offer a retirement
plan to enroll their employees in a direct-deposit IRA unless the employee opts out. The contributions will be voluntary and
matched by the Savers Tax Credit for eligible families. The Administration is also streamlining the process for employers
to automatically enroll workers in 401(k) plans, which has been shown to boost participation, especially for low- and middle-income
workers. New tax credits would help pay employer administrative costs and the smallest firms would be exempt.
Simplifying and Expanding the Saver’s
Credit. The struggle to save enough to ensure a secure retirement became particularly
pronounced in the wake of the recent financial crisis, which delivered a major hit to the savings on which workers rely for
their retirement security. The Administration proposes to help working families save for retirement by expanding and simplifying
the Saver’s Credit to match 50 percent of the first $1,000 of contributions by families earning up to $65,000 and providing
a partial credit to families earning up to $85,000. The Administration will also make this tax credit refundable to ensure
that millions of additional middle-income families can take advantage of it even though they have no income tax liability.
Updating 401(k) Regulations
to Improve Transparency and Reliability. A majority of American workers rely
on 401(k)-style plans to finance their retirements, making it critical that the 401(k) system be safe, transparent, and well-regulated.
Even workers who save significant amounts may see their returns eaten away by fees and expenses. We need to do more to give
families better choices to reach a secure retirement. The Administration is:
· Improving the
transparency of 401(k) fees to help workers and plan sponsors make sure they are getting investment, record-keeping, and other
services at a fair price. Encouraging plan sponsors to make unbiased investment advice available to workers, helping workers
avoid common errors that undermine retirement security, while providing strong protections against conflicts of interest.
· Promoting the availability of annuities and other forms of guaranteed lifetime income, which transform
savings into guaranteed future income, reducing the risks that retirees will outlive their savings or that their retirees’
living standards will be eroded by investment losses or inflation.
· Reviewing and requiring clear
disclosure regarding target-date funds, which automatically shift assets among a mix of stocks, bonds, and other investments
over the course of an individual's lifetime. Due to their rapidly growing popularity, these funds should be closely reviewed
to help ensure that employers that offer them as part of 401(k) plans can better evaluate their suitability for their workforce
and that workers have access to good choices in saving for retirement and receive clear disclosures about the risk of loss.
Pension Rights Center says auto-IRA proposal is flawed and calls
for bigger reforms
For immediate release January 28, 2010
www.pensionrights.org
Contact Nancy Hwa 202-296-3776
STATEMENT ON PRESIDENT OBAMA’S AUTO-IRA PROPOSAL
WASHINGTON – The Pension Rights Center applauds the Obama administration for recognizing retirement
insecurity as a major national issue – both in the President’s State of the Union address last night and in the
recommendations released by the Middle Class Task Force
on Monday. Giving workers better information about the fees they pay for their 401(k) accounts, ensuring that investment
advice is given without conflicts of interest, making it easier for individuals to save for retirement, and expanding government
matches for savings by low- and moderate-wage earners are important, if modest, proposals.
However, these measures should be only a starting point for reform. In particular, the centerpiece of the
President’s retirement income initiatives – establishing automatic IRAs in the workplace – requires careful
thought and debate. As it currently stands, the proposal will only marginally increase retirement savings for
those who can afford to contribute. It will not do enough to address the retirement income
crisis that is engulfing the country.
The auto-IRA proposal requires that employers with more than 10 workers who now do not sponsor a retirement
plan enroll their employees in a direct-deposit IRA, unless the worker opts out. Some of these contributions would be
matched by a tax credit provided by the government.
While the Pension
Rights Center supports efforts to encourage people to save for retirement, there are downsides to the auto-IRA approach that
have not been discussed and that should be addressed. In fact, in some instances, the auto-IRA can end up hurting some
of the very workers it is meant to help.
1. Penalty taxes disproportionately hurt lower-income
workers: Many individuals
may at first contribute to an IRA, only to find later that they need to pull that money out before retirement for an emergency.
Not only will they have to pay income taxes on the money withdrawn, but they will also be hit with a 10 percent penalty
tax. While proponents of the auto-IRA claim that low- and middle-income workers will benefit from the proposal the most,
these are the individuals most likely to need the money before retirement.
2.
The proposal could remove
the impetus for employers to do better: If employers are required to set up auto-IRAS, they may decide not to set up a better plan that includes employer
contributions. At a time when employees are facing the most uncertain economic conditions since the Great Depression,
we need shared responsibility. All the risks and responsibilities of retirement savings should not be put onto individuals.
3. Fees could eat away the balance: The fees that financial institutions charge could be hefty, eating away at individuals' account
balances. The alarmingly high level of fees charged for 401(k)s has been the object of much attention. Similar
concerns exist for the IRA market. In January 2010, H&R Block paid $20.2 million to settle a nationwide lawsuit
over the company’s marketing of IRAs with hidden fees that caused hundreds of thousands of mostly lower-income clients
to lose money.
4. There’s nobody minding the store: If the number of IRA accounts increases overnight, who will provide the necessary oversight? IRAs
are not covered by the federal pension laws that govern 401(k) plans and traditional pensions. This means that the Department
of Labor does not oversee the management of IRAs. The responsibility falls to the Securities and Exchange Commission,
which has larger concerns than overseeing money invested in small accounts. No one will be watching if some employers
do not make the proper contributions to employees’ accounts (as has happened in the 401(k) world) or if other fraud
takes place.
5. The auto-IRA does not cover everyone. The Obama administration proposal provides an exception for employers that have 10 or fewer workers,
which means that at least 18 million people would not be covered by the plan. This represents about 15 percent –
and the fastest growing sector – of the private workforce.
6.
The auto-IRA is not the
answer to the nation’s retirement income problems. If the auto-IRA passes Congress, it is only a small step forward, and the Pension Rights Center is
concerned that it may forestall efforts for more comprehensive reform. The auto-IRA cannot be the only thing we do.
While the auto-IRA is likely to increase the number of people who
save for retirement, it will do nothing to ensure that people have enough money in retirement or that their money is secure.
Increasing the number of people with plans is not the same as ensuring that all workers have adequate retirement savings.
That’s why the Pension Rights Center and other groups launched Retirement USA -- to work for a comprehensive retirement
system for the future. Retirement USA’s main principles are universal coverage, and secure and
adequate income. Making it easier for people to save for retirement is a worthwhile step, but the auto-IRA is not a
long-term solution.
Jack Ehnes attends Davos conference to present paper
on green investing
Head of California pension fund travels to Swiss conference
Jack Ehnes, chief executive
of the California State Teachers' Retirement System, will attend the World Economic Forum at the Davos ski resort. The
fund's critics don't object to the $4,000 expense.
LA Times January 28, 2010
Beleaguered Wall Street bankers might be staying away from this year's World Economic Forum at Davos,
the Swiss ski resort.
But that hasn't discouraged Jack Ehnes, the chief executive of the
California State Teachers' Retirement System, from attending his fourth get-together of global movers and shakers from
economics, business and government. The conference runs through Sunday.
Although his $134-billion
fund, the nation's second-largest public pension fund in assets, had lost about 25% of its portfolio as of June 30, the
end of its last fiscal year, its board approved Ehnes' request for the European trip, which is expected to cost around
$4,000.
"It is a beneficial trip for us," said Ricardo Duran, a spokesman for the fund known as CalSTRS.
"It keeps us in the forefront of some of the issues the board has identified as being important and that they want to
deal with -- one of them being climate risk."
Duran also said Ehnes' contacts with business
and governmental leaders also were valuable.
During the invitation-only event, Ehnes is scheduled
to make a speech on "financing low-carbon growth" and plans to present a paper about "green investing in 2010,"
Duran said.
Although Ehnes is taking an active role in the 40th annual Swiss conclave, his counterparts at the country's
biggest government pension fund, the California Public Employees' Retirement System, are staying away from the high-profile
meeting. The $200-billion fund is embroiled in a controversy over multimillion-dollar commissions paid to middlemen from investment
managers that help them secure business with CalPERS.
CalPERS' portfolio is down about 20% from its
2007 peak.
"Given the current fiscal realities, we are trying to reduce the cost of travel," said CalPERS
spokesman Brad Pacheco.
Critics of California's big pension funds, however, say they don't
have a problem with Ehnes' attendance at Davos. "I don't have a heartache with the money," said Marcia Fritz,
the head of Californians for Pension Reform, a group that is pushing to put two pension-related measures on the ballot. The
proposed initiatives would reduce pension costs by delaying retirement eligibility for future state and local government and
school district employees.
"I think it's good that he's going because the pension funds
we have are international both in scope and size," Fritz said. "I think it's good for him to interface with
other countries because he can see that the other funds are moving toward their members having longer working lives."
Ehnes' wife, Cindy -- the director of the California Department of Managed Health Care, which regulates
health maintenance organizations and preferred provider organizations -- is also attending the Davos forum. Her office said
she was traveling on personal business. Her expenses are not being paid with state or pension fund money, CalSTRS said.
Divided SEC votes to encourage
company disclosure of effects of climate change on their business
SEC Votes For More Disclosure About Climate Risks
Dow Jones Newswires January 27, 2010
WASHINGTON -(Dow Jones)- A divided U.S. Securities
and Exchange Commission on Wednesday voted to encourage companies to disclose the effects of climate change on their business,
bringing a partisan debate over global warming into a new arena.
Democrats and Republicans split over
approving the guidance in a 3-2 vote. Democrats portrayed the action as clarifying existing disclosure requirements. Republicans
said the SEC appeared to be more interested in supporting an environmental agenda than in addressing more pressing issues
stemming from the aftermath of a financial crisis.
"We are not opining on whether the world's climate
is changing, at what pace it might be changing or due to what causes," SEC Chairman Mary Schapiro said. But she said
that the guidance "will help to ensure that our disclosure rules are consistently applied, regardless of the political
sensitivity of the issue at hand, so that investors get reliable information."
Investors
had pushed the SEC to act, citing the need to factor climate risks into stock-buying decisions. Those same investors now plan
to study the next round of corporate disclosure requirements to determine whether companies are following the guidance.
"In cases where we see there's a clear lack of disclosure," we will ask "the SEC to intervene
and enforce," said Peter DeSimone, the director of programs at the Social Investment Forum, which focuses on socially
responsible investing. He said that of particular interest would be insurance companies, oil and gas companies and the automotive
industry, "which are a little more susceptible to climate risk than others."
The
U.S. Environmental Protection Agency is already preparing to regulate greenhouse gases and starting this year will require
companies to disclose greenhouse-gas emissions from individual facilities that produce a certain amount of pollution. The
SEC guidance potentially goes a step further by requiring public companies to discuss global warming at a company-wide level
so that investors don't have to tally up activities at each individual factory or plant.
"I
can only conclude that the purpose of the release is to place the imprimatur of the commission on the agenda of the social
environmental policy lobby, an agenda that falls outside of our expertise and beyond our fundamental mission of investor protection,"
said Kathy Casey, a Republican commissioner.
New York York Attorney General Andrew Cuomo has already
been pushing for climate disclosures. Last year, AES Corp. (AES: 12.95, -0.17, -1.3%) agreed to disclose the financial risks that global warming may pose for investors, the latest
pact resulting from a probe of energy companies that began in 2007. The New York attorney general was part of the group that
had petitioned the SEC to act.
Insurance companies are among those most likely to be affected by the SEC action. Under the
SEC guidance, a company that is assessing disclosure obligations should consider the "actual and potential physical impact"
of climate change on its business. The commission said that insurance companies may want to consider disclosing whether severe
weather or changes in sea levels increase the risk of insurance claims in coastal regions.
The
SEC also said that companies should consider whether the impact of existing climate laws and regulations is material to their
businesses. The agency said that in some cases companies may need to consider whether to share information about the impact
of pending regulation or legislation.
Congressional Republicans are unhappy. On Tuesday, Rep.
Joe Barton, R-Texas, the ranking member of the U.S. House Energy and Commerce Committee, wrote the SEC that the guidance was
"transparently political" and "a breathtaking waste of the commission's resources."
A company may face decreased demand for goods that produce significant greenhouse-gas emissions or higher
demand for goods that lower greenhouse-gas emissions, the SEC noted. As a result, companies should consider disclosing any
such effects due to new regulatory or business trends, the SEC said. The SEC also said that companies should consider disclosing
the effects on their business stemming from international climate accords.
Wall Street
Journal story alleges link between trial lawyer campaign contributions and pension fund lawsuits
Trial Lawyers Contribute, Shareholder Suits Follow
Wall Street Journal February 3, 2010
Norfolk County,
Mass., has only a small pension fund, but it is a big player in court.
Two weeks ago, the fund joined with two others in a shareholder suit against drugstore chain CVS Caremark Corp., whose stock had fallen. It was the 12th time since 2006 the pension fund has gone to
court after a stock it owned declined.
Former Ohio Attorney General Marc Dann received campaign contributions from out-of-state plaintiffs' firms.
For
10 of the suits, including the latest, the pension fund hired a New York plaintiffs' law firm called Labaton Sucharow
LLP. That firm, in turn, has taken a keen interest in the political fortunes of Norfolk County Treasurer Joseph A. Connolly,
who heads the pension fund's board. Attorneys at the New York law firm and their relatives have made 68 separate donations,
of the maximum $500 apiece, to Mr. Connolly's campaign war chest since late 2005, public records show.
Asked why its lawyers gave to a county treasurer in a state not its own, Labaton Sucharow
said its "members and their families make perfectly legal political contributions to elected officials and candidates
who support shareholder rights." Mr. Connolly didn't respond to requests for comment.
It is legal for lawyers, like anyone else, to give campaign money to politicians. But questions
arise when the politicians are local officials with influence over the selection of legal counsel for shareholder lawsuits
filed by public pension funds, a role that can be lucrative.
A Wall Street Journal analysis documented the extent of campaign giving by plaintiffs' law firms specializing in
shareholder litigation. It found that 25 leading firms, their lawyers and family members contributed a total of more than
$21 million in the past decade to state-level candidates and party funds, as well as to national-party groups that work to
elect state officials. Less than 40% went to candidates within the law firms' home states.
Labaton Sucharow was among the donation leaders. The law firm, its lawyers and their family
members made $612,000 in campaign contributions in 24 states outside its New York home base in the decade.
Some lawyers say widespread political giving by plaintiffs' law firms, especially outside
their home states and near the time when counsel are chosen, is evidence of a corrosive pay-to-play culture in the securities-litigation
industry.
"Plaintiffs' lawyers donate because
they think it buys them access to people who make decisions over how pension funds select counsel," says Fred Isquith,
a partner at Wolf Haldenstein Adler Freeman & Herz LLP, a plaintiffs' firm in New York. Such giving "creates
an appearance of complete impropriety," he says, and "should be outlawed."
The American Bar Association takes a similar position. The ABA, in giving guidance on ethics,
says lawyers shouldn't accept a "government assignment" if they made a political contribution "for the
purpose of obtaining or being considered for" such a job.
The Journal looked at donations in all 50 states from Jan. 1, 2000, through mid-2009, compiled by the National Institute
on Money in State Politics, as well as data from other state and federal sources. About 72% of contributions went to Democrats.
The Journal also examined the 25 largest recent class-action
settlements in which public pension funds served as lead plaintiff, as calculated by NERA Economic Consulting. In 15 of the
cases, one or more law firms representing a lead pension fund had donated to a politician in the fund's home state.
Most plaintiffs' lawyers say they give simply to support like-minded
officials. "We make sizable contributions to candidates we believe support investor causes," said Stanley Bernstein,
of the New York firm of Bernstein Liebhard LLP.
The
firm and people associated with it made $1.2 million in campaign donations, mostly in 31 states other than New York. Plaintiffs'
lawyers also say their contributions help offset cash from pro-business interests opposed to shareholder litigation.
Public officials who favor shareholder suits say these are a needed
check on corporate misbehavior and have recovered billions of dollars of losses caused by past abuses at WorldCom, Tyco International
and elsewhere. They deny any pay-to-play dynamic, and say lawyers are chosen on merit.
Public pension funds increasingly are the lead plaintiffs in shareholder suits, partly
because a federal law encourages judges to pick big institutional investors for this role.
As a result, plaintiffs' law firms focus their marketing efforts on wooing public pension
funds and the state and local officials who influence them. Some firms enlist the help of lobbyists and attend pension-fund
conferences.
Some lawyers say they aren't sure
whether contributing helps them get government business, but are afraid not to. Some track how much rivals donate so they
don't fall too far behind.
"There are certain
places where, to be in the game, you have to donate," said Steven Toll, a partner at Cohen Milstein Sellers & Toll
PLLC in Washington. It has contributed only modestly—$62,000 to out-of-state candidates—and Mr. Toll says he is
sure its low level of giving has cost the firm business. But "we want to be chosen on merit, not because we contributed
money," he said.
Ohio politicians received the
most donations from out-of-state plaintiffs' firms in the past decade—more than $1.65 million, by the Journal's
analysis. Ohio pension funds have filed at least 21 shareholder suits since 2002, according to state officials.
Running for Ohio attorney general in 2006, Democratic candidate Marc
Dann told plaintiffs' law firms he favored shareholder suits and would file more of them than his rival would, he says.
He received at least $59,500 from out-of-state securities litigators.
He won, and in the next 16 months, his office filed at least four securities suits on behalf of state pension funds,
mostly using law firms that had given to his campaign or to the state Democratic Party. "I have no doubt I received donations
with the expectation of work," Mr. Dann said. But, he said, attorneys were chosen strictly on merit.
How donations and decisions converged in Rhode Island. Click to see
full chart.
Ohio's legislature tried to crack down
on perceived pay-to-play abuses with a 2007 law that prohibited giving a state contract to any firm that had donated more
than $2,000 to a politician overseeing such a contract. A court later overturned the law because of defects in the legislative
process. While the law was in effect, it appeared simply to redirect the money flow to party committees.
Mr. Dann resigned after 16 months in office. After an interim appointment, the state held
an election for a successor, won by another Democrat, Richard Cordray. Out-of-state plaintiffs' law firms gave little
cash directly to Mr. Cordray's campaign, but in 2007 and 2008 they contributed $830,000 to the Ohio Democratic Party candidates'
fund, which passed about $2 million to support Mr. Cordray.
Mr. Cordray then launched what he called an "aggressive" litigation strategy. Six law firms so far have been
retained to represent Ohio pension funds in new lawsuits; five of the firms donated a total of $300,000 to the state Democratic
party candidates' fund in 2008.
Mr. Cordray said
the shareholder suits "have nothing to do with politics and everything to do with standing up for Ohio's pension
systems, retirees and investors who have been harmed by corporate wrongdoing."
State officials,
in deflecting pay-to-play allegations, often say they pick law firms on merit by first issuing a public "request for
proposals," or RFP; law firms then compete to be on a list that pension funds will use for any future litigation. But
some lawyers say the RFP process itself can be a political fund-raising opportunity.
Rhode Island General Treasurer Frank Caprio told the state Investment Commission on March 26, 2008,
that he planned to issue an RFP for additional securities-litigation law firms. Five days later, Mr. Caprio received 26 campaign
donations, totaling $23,000, from people associated with two New York plaintiffs' firms, Labaton Sucharow and Bernstein
Litowitz Berger & Grossmann LLP. Both were among the four selected.
Last summer, after local reporters asked about law-firm contributions, Mr. Caprio returned $54,250 from those firms
and five others. His campaign committee said it hadn't solicited the donations, and returned them because Mr. Caprio "wanted
to assure taxpayers that he makes decisions based on what is best for the state of Rhode Island."
Neither Bernstein Litowitz nor Labaton Sucharow had any comment on the Rhode Island matter.
Once law firms make it onto a pension fund's list of potential
litigators, they typically monitor the client's holdings and suggest lawsuits when they spot a stock drop that may be
due to some corporate abuse. There's no cost to the pension fund in suing, because the lawyers work on a contingent-fee
basis.
In the case of CVS Caremark, on Jan. 15 a lawyer
representing Labaton Sucharow contacted Norfolk County's Mr. Connolly and other Massachusetts pension-fund overseers by
email.
In the message, reviewed by the Journal, the
lawyer recited an alleged "fact pattern" of belated disclosures by the drugstore chain leading to the "biggest
drop in 8 years" in CVS's stock price in November.
Two of the pension funds agreed to be represented by Labaton Sucharow in the suit, which alleges CVS didn't disclose
certain problems early enough. CVS said it doesn't comment on pending litigation.
A third pension fund suing CVS, the Brockton (Mass.) Retirement System, also received the
Labaton Sucharow solicitation, but had just signed up with another law firm. Harold Hannah, the Brockton fund's executive
director, says he gets many duplicate lawsuit suggestions. "I'm tired of it," he said.
"A good portion of these cases are ginned up by the plaintiffs' attorneys who
go shopping for clients," said Robert Litan, a former Clinton administration Justice Department official now at the Brookings
Institution.
"It shouldn't be the case that
plaintiffs' lawyers should make contributions to public officials and turn around and get legal business from them,"
he said. "You want the best lawyer, not the one with the biggest campaign checkbook."
Tensions over the confluence of politics and lawsuits are on show at the $40 billion Massachusetts
state pension fund, which in recent years has sued companies including Bear Stearns, Schering Plough and Fannie Mae.
The pension-fund board's executive director, Michael Travaglini,
seems a reluctant litigant. "Nobody has convinced me of the value" of filing such a lawsuit, he said, as opposed
to simply claiming a pro-rata share of any eventual settlement in a suit filed by somebody else.
Asked why the Massachusetts board has filed shareholder suits, Mr. Travaglini said the
state treasurer and the state's current and past attorneys general have been interested in using such suits to spur corporate-governance
reforms. All three officials received donations from securities class-action lawyers, records show.
The state pension board's most recent hiring of securities litigators came in 2005.
Mr. Travaglini says the board issued an RFP, mostly at the behest of its chairman, Massachusetts Treasurer Tim Cahill.
While the RFP was pending, Mr. Cahill received $10,000 in $500 donations
from people associated with Labaton Sucharow. It was one of four firms later selected. Bernstein Liebhard lawyers and family
members contributed $5,500 to Mr. Cahill in the weeks after that firm, too, was selected.
Mr. Travaglini said he didn't know about the donations and they had no effect on the
selection process. Mr. Cahill said he would let Mr. Travaglini speak for him.
Massachusetts Attorney General Martha Coakley pushed for a new RFP in 2009 to expand the state's
stable of plaintiffs' law firms to as many as 12, according to Mr. Travaglini. "I said, 'This is crazy,'
" he said, because his staff was already busy with lawsuit suggestions from the current four firms. The RFP was put on
hold while Ms. Coakley ran, unsuccessfully, for Ted Kennedy's vacant Senate seat. Her staff didn't respond to requests
for comment.
In the biggest cases, legal fees can run
in the millions. That's what happened in a suit by Calpers, the California pension fund, against UnitedHealth Group Inc., where stock options were backdated. The suit was filed for Calpers by the San Diego law
firm of Coughlin Stoia Geller Rudman & Robbins LLP.
That
firm is a descendent of the famed plaintiffs' firm once called Milberg Weiss Bershad Hynes & Lerach, which split in
two in 2004.
Coughlin Stoia filed the suit for Calpers
in July 2006. A month later, Coughlin Stoia and its attorneys contributed $107,000 to the gubernatorial campaign of Phil Angelides,
who as California's then-treasurer was a member of Calpers's board. Asked whether the donations were related to the
hiring of the law firm, a spokeswoman for Mr. Angelides declined to say, but said that Mr. Angelides "was one of a number
of members of the Calpers board and he had tens of thousands of donations during the eight years he was treasurer." He
now leads a national board investigating the causes of the financial crisis.
Coughlin Stoia's spokesman—who previously worked for Mr. Angelides—said some of the
firm's lawyers "actively support causes they believe in," including candidates.
Calpers said that its general counsel, not the board on which Mr. Angelides sat, picks
outside litigators, adding that Coughlin Stoia was chosen based on its experience and resources. The UnitedHealth suit was
settled in August for $925 million. Calpers's share of that came to $3.2 million. The legal fee was $65 million. Most
of it went to Coughlin Stoia.
IRS Advisory Committee on Tax
Exempt and Governmental Entities seeks feedback on compliance checklist
Excerpt:
In order to assist state and local government (public)
employers and their legal and financial advisors in complying with federal employment tax laws and regulations, the IRS Advisory
Committee on Tax Exempt and Governmental Entities (“ACT”) has developed a compliance verification checklist for public employers that is now posted on the National
Conference of State Social Security Administrators (NCSSSA) website: http://www.ncsssa.org/whatsnewcombo.html.
The ACT’s Federal-State-Local Government (FSLG) Subcommittee is finalizing work it began during 2008-2009
to adapt the existing FSLG Compliance Check Form 4318 into a self-check form for public employers to access in order to enable
them to verify their compliance with applicable federal laws and regulations. The existing Form 4318 is currently available
only to FSLG Specialists.
Access the full document here: www.nasra.org/resources/FSLG_Article_100120.pdf
Bureau of Labor Statistics reports growth in private sector compensation
in 2009 4th quarter is slowest since tracking began in 1979
From www.bls.gov
Employment
Cost Index news release text
Transmission of material in this release is embargoed until USDL-10-0100
8:30 a.m. (EST) Friday, January 29, 2010
Technical information: (202) 691-6199 NCSinfo@bls.gov http://www.bls.gov/ect
Media contact: (202) 691-5902 PressOffice@bls.gov
EMPLOYMENT
COST INDEX - DECEMBER 2009
Compensation costs for civilian workers increased 0.5 percent, seasonally adjusted, for the 3-month
period ending December 2009, the U.S. Bureau of Labor Statistics reported today. Both components of compensation--wages and
salaries (which make up about 70 percent of compensation) and benefits (which make up the remaining 30 percent of compensation)--increased
the same amount, 0.5 percent.
Civilian Worker Data
Compensation
costs for civilian workers increased 1.5 percent for the 12-month period ending December 2009. This was smaller than the 2.6
percent increase for the 12-month period ending in December 2008. Wages and salaries also increased 1.5 percent for the current
12-month period, slowing from a 2.7 percent increase for the 12-month period ending in December 2008. Benefit costs rose 1.5
percent, compared with a 2.2 percent increase for the 12-month period ending December 2008.
Private Industry Worker Data
Compensation costs increased 1.2 percent, the same as last quarter’s
12-month percent increase. These are the smallest percent changes published since the series began in 1979. The wage and salary
series increased 1.4 percent for the current 12-month period, the same as the September 2009 12-month percent increase.
These are also the smallest published percent changes since the series began in 1975. The cost of benefits increased 1.0 percent
for the 12-month period ending December 2009. This is the smallest published percent change since the series began in 1979.
In September 2009, benefits increased 1.1 percent. Employer costs for health benefits increased 4.4 percent for the 12-month
period ending December 2009. In December 2008, the 12-month percent change was 3.5 percent.
Among occupational groups, compensation cost increases for private industry workers for the 12-month period ending December
2009 ranged from 0.7 percent for management, professional, and related occupations to 1.9 percent for production, transportation,
and material moving occupations.
Among industries, compensation cost increases for private industry
workers for the current 12-month period ranged from 0.7 percent for construction and professional and business services to
2.0 percent for education and health services.
Press Release: Survey finds states and local governments
using hiring freezes, pay freezes, layoffs and furloughs
FOR
IMMEDIATE RELEASE January
26, 2010
STATE AND LOCAL GOVERNMENTS CUT PERSONNEL AND BENEFITS
But
Struggle to Fill Some Critical Positions
WASHINGTON, DC -- Hiring freezes, pay freezes, layoffs, and furloughs top the list of ways
that local and state governments are cutting costs, according to an online survey of government managers by the Center for State and Local Government Excellence.
States and local governments also
have made significant changes in their benefit offerings.
Half of the respondents, human resources professionals,
report that their governments have made changes to their health care plans:
- Increased
employee contributions (69 percent)
- Added number of years required to vest (25 percent)
- Added wellness programs, 24-hour nurse lines, or on-site
clinics (25 percent)
- Reduced benefits (23 percent)
- Tiered benefits (15 percent)
- Decreased employer contributions (10 percent)
Among
the 21 percent whose governments have changed their retirement plans, 73 percent say the changes have not affected current
workers and 60 percent say the changes have not affected new hires.
There are signs that governments need a more
strategic approach to their talent challenges. Survey respondents said they are struggling to fill certain critical
positions, including jobs in engineering, skilled trades, information technology, health care, finance, law enforcement, and
top management.
Even furloughs have not produced the savings that had been anticipated in some places. While
61 percent of respondents say that they achieved the savings that had been budgeted, 39 percent said they did not.
“Local and state governments face fiscal constraints for at least two more years, but they also face major talent
challenges,” said Elizabeth K. Kellar, president and CEO, Center for State and Local Government Excellence. “They
must tighten their belts while keeping an eye on their aging workforce. Making sure they have the right people in place
to provide critical services is just as important as balancing the budget.”
The economic downturn has affected
retirement plans, giving governments a little breathing room. Almost half (46 percent) of the survey’s respondents
report that retirement-eligible employees are postponing their retirements.
The survey was conducted among members
of two groups of government professionals: the International Public Management Association for Human
Resources (IPMA-HR), and the National Association of State Personnel Executives (NASPE). Of the members who responded to the electronic
questionnaire, 78 percent work for local government; 14 percent for state government; 3 percent for federal government; and
5.4 percent for a non-government sector. Some questions elicited more responses than others.
“The
survey results highlight the short- and longer-term challenges facing governments,” said Neil E. Reichenberg, executive
director of IPMA-HR.” In the short term, governments need to make sure that they are dealing effectively with the economic
downturn, which has required many employers to make painful decisions that have impacted their most important asset –
their employees. Governments need to focus on workforce and succession planning so that they can address their talent needs
when the economic recovery takes hold.”
“It’s key that governments utilize workforce plans that
consider future talent needs when they are making these difficult staffing decisions forced by the significant fiscal constraints
they’re experiencing,” added Leslie Scott, director of NASPE. “Our member states have noted that for
the limited hiring that the states are currently doing, the applicant quality is higher and it’s providing an opportunity
to hire talented managers who may not have previously considered working for state government.”
Read the
full survey at http://tinyurl.com/recessionworkforce.
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About
the Center for State and Local Government Excellence
The Center for State and Local Government Excellence helps state and local governments
become knowledgeable and competitive employers so they can attract and retain a talented and committed workforce. The Center
identifies best practices and conducts research on competitive employment practices, workforce development, pensions, retiree
health security, and financial planning. The Center also brings state and local leaders together with respected researchers
and features the latest demographic data on the aging workforce, research studies, and news on health care, recruitment, and
succession planning on its website, www.slge.org.
About
the International Public Management Association for Human Resources
The International Public Management Association
for Human Resources (IPMA-HR) is an association representing the interests of state, local, and federal sector human resources
professionals. IPMA-HR provides human resource leadership and advocacy, professional development, information, and services
to enhance public sector performance. Learn more at www.ipma-hr.org.
About
the National Association of State Personnel Executives
NASPE represents the nation’s state government
human resource management directors and deputy directors and provides a national leadership forum to advance state government
human resource management through the exchange of best practices, strategies, and solutions. Visit them on the web at www.naspe.net.
