Pension Reform measures across the US
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Pension reform is a hot topic both here in NH and across the country. Here are some of the reform measures currently underway in other states:
California: Originally there were two plans under consideration that would be put before the voters through referenda. One would put all new employees into a 401(k) style plan, which is currently under consideration here in New Hampshire. The other would be a hybrid plan, similar to what is now in place in Utah and is backed by Gov. Jerry Brown. Brown’s plan includes a rider that would increase taxes.
The organization behind the push for the 401(k) plan suspended its campaign after reviewing the summary language that was to be included on the ballot. They charge that the Attorney General for California, who writes the summaries that appear on the ballot, of deliberately casting it in a negative light as a political move to help Gov. Brown’s plan pass. The Republican members of the California House have introduced Gov. Brown’s plan, minus the tax hikes, as legislation.
New York: Gov. Andrew Cuomo has put forward a plan that adds an additional tier to the current retirement system that would offer a reduced pension and for the first time offer a 401(k) style plan as an option, though not make it mandatory. Cuomo’s plan has the support of NYC Mayor Michael Bloomberg as well as many other city and county leaders. Republicans in Albany has expressed a willingness to consider the proposal while many Democrats have remained silent on the matter, only a few rejecting the plan outright.
South Carolina: Currently under consideration is a package of reforms to the current system that would increase employee contributions, increase the retirement age and make alterations to the payout calculations that would reduce costs.
Louisiana: Gov. Bobby Jindal has proposed a two pronged reform measure. The first is to create a new cash balance plan for all new employees. A cash balance plan is a plan that creates individual accounts for employees while the state guarantees a set rate of return for those investments. That rate of return is not fixed and can go to zero but never turns negative. For current members of the state’s retirement systems, there will be an increase in contributions, retirement age and changes in the payout calculations to reduce costs.
Kansas: Gov. Sam Brownback has proposed closing the current defined benefit plan and putting in its place a 401(k) style plan. It is currently in committee in the House.
Illinois: With a retirement system funding ratio of just 43.4%, one of the worst in the nation, Gov. Pat Quinn has put forth suggestions as to what reform could look like, such as changing contribution rates, increasing the retirement age and cost of living adjustments. He has not given specifics or endorsed a particular plan, though he recently appointed a working group to come up with reform measures by April 15. In January, Moody’s cut Illinois’ bond rating from A1 to A2, specifically citing the state’s pension funding ratio.