The UPEA State Board arranged a meeting with Senator Liljenquist and retirement system stakeholders, including the Utah School Employees Association, Utah Education Association, and Cops United for Retirement Equity. Liljenquist discussed potential legislation at the January 4th meeting and answered questions about changes to the retirement system. His proposed legislation should amount to four bills.
His first bill would allow employees hired after July 1st, 2011 to select either a) a defined contribution plan administered by URS wherein 8% will be deposited into a 401(a) plan; or b) a hybrid defined benefit/defined contribution plan. The hybrid option would include a 5% DB plan and 3% DC contribution. As rates fluctuate, the 3% would either increase or decrease to compensate for the changes in rates. Various components of the new system would include: retirement withdrawals to begin at age 59, 1% service credit per year, and a 5 year final average salary calculation. Both programs would require a 4-year vesting. This also combines all retirement systems into one system.
His second bill would eliminate the 1.5% salary contribution into current employees 401(k) and put that money into the pension system to help address the current 2.1% contribution rate increase.
His third bill would increase the years of service for retirement for current employees using the following schedule:
Employees in the big retirement system
24-30 years of service would see no change
20-24 years of service would be eligible for retirement after 31 years
16-20 years of service would be eligible for retirement after 32 years
10-16 years of service would be eligible for retirement after 33 years
4-10 years of service would be eligible for retirement after 34 years
Less than 4 years of service would be eligible to retire after 35 years
For Public Safety/Firefighters/Judges would also increase the retirement service.
18-20 years would see no changes
15-18 years of service would be eligible to retire after 21 years
12-15 years of service would be eligible to retire after 22 years
9-12 years of service would be eligible to retire after 23 years
6-9 years of service would be eligible to retire after 24 years
Less than 6 years would be eligible to retire after 25 years
His fourth bill would change the benefits for retired/rehired employees. For rehires after July 1, 2010, this bill would require suspension of the pension payments upon rehire, but allow rehired employees to earn additional service credit and also require the employer to pay the full URS contribution rate into the retirement system. This would also remove the service cap for public safety, which is currently 30 years. For rehires prior to July 1, 2010, the bill suspends the 401K contribution to the employee and requires agencies to pay the contribution rate to URS.
As soon as the bills are made available for viewing, we will inform our members. This is just an overview of what is expected to be contained in the bills and may change prior to finalization.
UPEA is working toward a better solution that will keep retirement whole for all employees.
UPEA has also called for an independent actuarial analysis and more time to educate stakeholders on the issue.
Thursday, January 7, 2010
Monday, December 14, 2009
Gov's Budget Recommendation Notes
The Governor said there is a budget gap of slightly less than $700 million; not the $850 million that was anticipated. Since the legislative session however, there has been a revenue decrease of $157 million for the FY2010 budget year, necessitating the 3% cuts discussed above.
FY2010 Budget Reductions
Agency Reductions - $39 million
Public Education - $72 million
Bonding for Roads - $25 million
Medicaid Settlement - $20 million
OPED/Termination Pool - $6 million
Reduce USTAR - $5 million
Restricted fund balance - $16 million
However, the Governor's Office of Planning and Budget anticipates that the FY2011 budget will increase or flatten, due to additional revenues from the recovering economy. The Governor’s office estimates $191 million in revenue by the end of FY2011, which is a $34 million net growth for FY2011. However, the state will continue to weather shortfalls until then:
FY2010 Shortfall
Revenue Shortfall - $157 million
Additional Shortfall – $6 million
Supplemental Shortfall - $20 million
Total Shortfall - $187 million
FY2010 Budget Reductions
Agency Reductions - $39 million
Public Education - $72 million
Bonding for Roads - $25 million
Medicaid Settlement - $20 million
OPED/Termination Pool - $6 million
Reduce USTAR - $5 million
Restricted fund balance - $16 million
However, the Governor's Office of Planning and Budget anticipates that the FY2011 budget will increase or flatten, due to additional revenues from the recovering economy. The Governor’s office estimates $191 million in revenue by the end of FY2011, which is a $34 million net growth for FY2011. However, the state will continue to weather shortfalls until then:
FY2010 Shortfall
Revenue Shortfall - $157 million
Additional Shortfall – $6 million
Supplemental Shortfall - $20 million
Total Shortfall - $187 million
FY2011 Shortfall
Public Education - $293 million
Higher Education - $66 million
Other State Agencies - $151 million
Total Shortfall - $510 million
Total Shortfall for remainder of FY2010 and FY2011 = $693 million
The Governor’s FY2011 Budget Recommendations:
· Fully funds the budget
· Protects public and higher education
· Avoids exacerbating the budget and its structural imbalance
· Covers needs in state agencies
· Preserves $253 million in the Rainy Day Fund
· No tax increases.
The Governor's FY2011 budget priorities would cost an estimated $510 in his $11 billion budget.
1. Public Education - $293 million.
2. Higher Education – $66 million.
3. Other State Agencies - $151 million.
a. Corrections - $21 million.
b. Human Services - $18 million.
c. Workforce Services - $2 million.
d. Health - $38 million.
The FY2011 recommendations also included a list of additional revenue streams to enhance revenue growth within the State:
Stop the Sales tax vendor discount (1.31%) that was implemented several years ago. This will provide the state with $20 million in on-going funds.
Begin a quarterly estimated tax filing for self-employed persons. This would provide an additional $125 million in one-time funds.
Bonding for Roads, freeing up cash in transportation. This would provide $25 million in FY2010 and $75 million in FY2011.
Tap into the Rainy Day Fund, providing $166 million in one-time funds.
Enhanced Federal Medicaid Assistance Program funding of $56 million in one-time funds.
Using the student population account for $31 million in one-time funds.
The additional revenues amount to $510 million.
When asked the question what will happen with the retirement account, Governor Herbert said his budget accounts for the contribution rate increase (2%) that URS requested this year.
Governor Herbert stated that it was important for him to live within his means, retain some money in the Rainy Day Fund, not increase taxes, and keep Public and Higher Education at the 2010 funding level, while still maintaining service in each of the state agencies.
Thursday, November 12, 2009
UPEA Statement to Retirement and Independent Entities Committee
Click Here for Full Audio
RETIREMENT POSITION STATEMENT
Mr. Chairman, members of the Committee – thank you for allowing me an opportunity to address you on this vital and sensitive topic. My name is Sheri Watters. I have been a public employee for 24 years. I currently hold several positions with the Utah Public Employee’s Association and serve as the Vice-Chair of the Retirement Membership Council. Today I am representing the view points of UPEA.
As most of you are aware, the genesis of today’s retirement system had root in 1915 when the Public Teacher’s system was authorized by this body. In the 1940’s state employees and others were authorized to be part of an expanded system. On March 8, 1967, over 40 years ago, the Legislature passed SB 205, “Public Employees Retirement System” thus consolidating various pension systems and allowing all state and local government employees and educators to be eligible for retirement coverage. Currently there are over 181,000 members of the retirement system, this encompasses active, retired, and terminated vested employees…including teachers, janitors, cops, firefighters, truck drivers, computer techs, legislators, therapists, and the list goes on and on.
Public pension systems across the country are experiencing stress. Utah is not alone in this dilemma. In an article about the plight of public employee pension systems, officials in Ohio stated it would take until “infinity” to get the investments back on track. Other systems such as California and West Virginia are merely a train wreck waiting to happen. Luckily, Utah has continued to be well managed by level-headed investors and by legislators being mindful of this important benefit. Our system is currently 86% funded. This number has fluctuated over the years. In 2000 the fund was at 103% funded but yet in 1990 it was as low as 74.6%. I believe that economic stability will return and the fund will recover based on historical data. Will there be another downturn? Will there be a catastrophic event in the Salt Lake area? Not even the actuaries can predict these types of unknowns.
Surveys and task forces across the country continue to show that a defined benefit program is the retirement option of choice. There are numerous reasons why. One reason is for attracting and retaining qualified and dedicated employees. We know that high turnover rates mean higher training costs. A DB plan allows the state to have a degree of control on who leaves employment and when. It is also important to note that the vast majority of Utah citizen retirees remain in the state and contribute an important sum to the state economy as well as continue to pay taxes in Utah.
State DHRM in its latest survey noted that “both health insurance and the retirement plan were rated as very important for retention – on a scale of 1 to 3 the state retirement plan was rated with an importance of 2.75 and the health plan as 2.83.” In addition, the survey showed the importance of the retirement plan for retention is high across all ages and years of service groups, which may indicate that even the younger groups do have an appreciation for the current plan.
The Utah Public Employee’s Association is cognizant of the difficult issues facing the legislature during this upcoming session…the budget, education, transportation, taxes, just to name a few. UPEA also recognizes that there are thousands of public employees across the state who have devoted their lives and careers to public service. We will continue to oppose any legislation that may negatively impact the current retirement system or reduce an employee’s take home pay to maintain these benefits. We are also highly concerned about changes which could cause an erosion of the merit system. This is our primary goal. We believe that a comprehensive study should be conducted to evaluate the cost-effectiveness of adjustments to the system to include changes for those who have retired and rehired and those who are not yet vested or not yet hired. Making structural changes to the current pension system without extensive research and cost analysis is not, in my opinion, in the best interests of all stakeholders.
As conscientious taxpayers/citizens of the State of Utah we know that the Utah Retirement System is a well-managed program designed and refined over many years to retain and attract quality individuals to aid in workforce stability and promote orderly turnover.
We believe that when the Utah Retirement System was established, legislators were concerned with looking at the long-range picture. We owe it to those individuals who have gone before us, those currently in the workforce and those who will replace us in the future to maintain a pension system founded on sound business principles, fiscal responsibility and fair market value that will continue to help Utah maintain its reputation for being a well-managed state, to protect our AAA bond rating and to continue to educate our children and grandchildren with qualified and competent teachers. We hope that you will see fit to choose a wise course of action as changes to the system today will ultimately affect individuals through the next decade and beyond. Time is not our enemy.
Thank you.
Comment on this: Click Here
RETIREMENT POSITION STATEMENT
Mr. Chairman, members of the Committee – thank you for allowing me an opportunity to address you on this vital and sensitive topic. My name is Sheri Watters. I have been a public employee for 24 years. I currently hold several positions with the Utah Public Employee’s Association and serve as the Vice-Chair of the Retirement Membership Council. Today I am representing the view points of UPEA.
As most of you are aware, the genesis of today’s retirement system had root in 1915 when the Public Teacher’s system was authorized by this body. In the 1940’s state employees and others were authorized to be part of an expanded system. On March 8, 1967, over 40 years ago, the Legislature passed SB 205, “Public Employees Retirement System” thus consolidating various pension systems and allowing all state and local government employees and educators to be eligible for retirement coverage. Currently there are over 181,000 members of the retirement system, this encompasses active, retired, and terminated vested employees…including teachers, janitors, cops, firefighters, truck drivers, computer techs, legislators, therapists, and the list goes on and on.
Public pension systems across the country are experiencing stress. Utah is not alone in this dilemma. In an article about the plight of public employee pension systems, officials in Ohio stated it would take until “infinity” to get the investments back on track. Other systems such as California and West Virginia are merely a train wreck waiting to happen. Luckily, Utah has continued to be well managed by level-headed investors and by legislators being mindful of this important benefit. Our system is currently 86% funded. This number has fluctuated over the years. In 2000 the fund was at 103% funded but yet in 1990 it was as low as 74.6%. I believe that economic stability will return and the fund will recover based on historical data. Will there be another downturn? Will there be a catastrophic event in the Salt Lake area? Not even the actuaries can predict these types of unknowns.
Surveys and task forces across the country continue to show that a defined benefit program is the retirement option of choice. There are numerous reasons why. One reason is for attracting and retaining qualified and dedicated employees. We know that high turnover rates mean higher training costs. A DB plan allows the state to have a degree of control on who leaves employment and when. It is also important to note that the vast majority of Utah citizen retirees remain in the state and contribute an important sum to the state economy as well as continue to pay taxes in Utah.
State DHRM in its latest survey noted that “both health insurance and the retirement plan were rated as very important for retention – on a scale of 1 to 3 the state retirement plan was rated with an importance of 2.75 and the health plan as 2.83.” In addition, the survey showed the importance of the retirement plan for retention is high across all ages and years of service groups, which may indicate that even the younger groups do have an appreciation for the current plan.
The Utah Public Employee’s Association is cognizant of the difficult issues facing the legislature during this upcoming session…the budget, education, transportation, taxes, just to name a few. UPEA also recognizes that there are thousands of public employees across the state who have devoted their lives and careers to public service. We will continue to oppose any legislation that may negatively impact the current retirement system or reduce an employee’s take home pay to maintain these benefits. We are also highly concerned about changes which could cause an erosion of the merit system. This is our primary goal. We believe that a comprehensive study should be conducted to evaluate the cost-effectiveness of adjustments to the system to include changes for those who have retired and rehired and those who are not yet vested or not yet hired. Making structural changes to the current pension system without extensive research and cost analysis is not, in my opinion, in the best interests of all stakeholders.
As conscientious taxpayers/citizens of the State of Utah we know that the Utah Retirement System is a well-managed program designed and refined over many years to retain and attract quality individuals to aid in workforce stability and promote orderly turnover.
We believe that when the Utah Retirement System was established, legislators were concerned with looking at the long-range picture. We owe it to those individuals who have gone before us, those currently in the workforce and those who will replace us in the future to maintain a pension system founded on sound business principles, fiscal responsibility and fair market value that will continue to help Utah maintain its reputation for being a well-managed state, to protect our AAA bond rating and to continue to educate our children and grandchildren with qualified and competent teachers. We hope that you will see fit to choose a wise course of action as changes to the system today will ultimately affect individuals through the next decade and beyond. Time is not our enemy.
Thank you.
Comment on this: Click Here
Tuesday, September 15, 2009
Perspective on Retirement and Independent Entities Committee
The Retirement and Independent Entities Committee convened a special meeting to discuss the public employee retirement system. Utah Public Employees’ Association monitored the meeting and testified on behalf of public employees. The committee also listened to testimony from Utah Retirement Systems, the URS actuary, Department of Human Resource Management, The Utah League of City and Towns, CURE, Utah Association of Counties, and various municipal law enforcement groups.
UPEA has taken the position that no one group has enough information to know the affects of changing the retirement system this year. Therefore, it would be prudent to maintain the system until actuarial metrics can provide information to justify a change. Senator Liljenquist concluded that the current $4 billion drop in the retirement fund over the past year will cause the state to lose an additional $300 million per year in investment returns. Chris Conradi, Senior Consultant for the URS actuary, Gabriel, Roeder, Smith & Co., said that Liljenquist’s assumption was correct despite potential economic recovery and higher rates of return on investments.
In a worse-case-scenario, URS will not recoup its $4 billion plus $300 million/year loss in time to keep up with demands placed on the retirement system by upcoming retirees.
The Utah League of Cities and Towns presented a package of benefit changes that would preempt a solution to this economy’s worse-case scenario. However, UPEA has spoken with economists and the Governor’s Office of Planning and Budget, who all confirm that the economy is showing signs of recovery. The worse-case-scenario may not play out, but a loss in benefits will harm public employees for years to come. UPEA does not endorse the ULCT’s position on changing the retirement system. For more information, see the list of available documents below.
Please stand behind UPEA in protecting your retirement benefits. Tell your coworkers about UPEA’s position and what’s at stake if employees aren’t unified. Encourage non-members to join.
Audio Recording of Committee Meeting
http://www.le.state.ut.us/asp/interim/Minutes.asp?Meeting=7690#Audio
League of Cities and Towns Proposal
http://www.ulct.org/ulct/docs/LPC_retirement_handout.pdf
Utah State Retirement Systems Overview
http://www.le.state.ut.us/interim/2009/pdf/00001059.pdf
Actuarial Perspective of the Utah State Retirement Systems
http://www.le.state.ut.us/interim/2009/pdf/00001115.pdf
Link to the Retirement and Independent Entities Committee Website
http://www.le.state.ut.us/asp/interim/Commit.asp?Year=2009&Com=INTRIE
UPEA has taken the position that no one group has enough information to know the affects of changing the retirement system this year. Therefore, it would be prudent to maintain the system until actuarial metrics can provide information to justify a change. Senator Liljenquist concluded that the current $4 billion drop in the retirement fund over the past year will cause the state to lose an additional $300 million per year in investment returns. Chris Conradi, Senior Consultant for the URS actuary, Gabriel, Roeder, Smith & Co., said that Liljenquist’s assumption was correct despite potential economic recovery and higher rates of return on investments.
In a worse-case-scenario, URS will not recoup its $4 billion plus $300 million/year loss in time to keep up with demands placed on the retirement system by upcoming retirees.
The Utah League of Cities and Towns presented a package of benefit changes that would preempt a solution to this economy’s worse-case scenario. However, UPEA has spoken with economists and the Governor’s Office of Planning and Budget, who all confirm that the economy is showing signs of recovery. The worse-case-scenario may not play out, but a loss in benefits will harm public employees for years to come. UPEA does not endorse the ULCT’s position on changing the retirement system. For more information, see the list of available documents below.
Please stand behind UPEA in protecting your retirement benefits. Tell your coworkers about UPEA’s position and what’s at stake if employees aren’t unified. Encourage non-members to join.
Audio Recording of Committee Meeting
http://www.le.state.ut.us/asp/interim/Minutes.asp?Meeting=7690#Audio
League of Cities and Towns Proposal
http://www.ulct.org/ulct/docs/LPC_retirement_handout.pdf
Utah State Retirement Systems Overview
http://www.le.state.ut.us/interim/2009/pdf/00001059.pdf
Actuarial Perspective of the Utah State Retirement Systems
http://www.le.state.ut.us/interim/2009/pdf/00001115.pdf
Link to the Retirement and Independent Entities Committee Website
http://www.le.state.ut.us/asp/interim/Commit.asp?Year=2009&Com=INTRIE
Friday, August 21, 2009
August Interim Report
Tuesday, August 18, 2009
Legislative Audit Subcommittee
Listen to Audio
UPEA monitored discussions during the Legislative Audit Subcommittee to prepare for the 2010 Legislative Session. This subcommittee reviews audits requested by legislators to help them make policy decisions. The media widely reported that audits revealed a major liability in the Medicaid Bureau of Program Integrity. However, the subcommittee also reviewed audits dealing with the courts, the Department of Technology Services, and DSPD. Overall, the audits revealed concerns with upper management and organizational communication.
However, the DSPD audit, A Review of Allegations Made Concerning The Division of Services for People with Disabilities, could not substantiate allegations submitted anonymously. Specifically, the letter alleges that the division’s forecasting process is inaccurate and that the current situation for privatizing Support Coordinators was not vetted properly.
The Legislative Auditor General suggested that further review of the allegations was unnecessary because the forecasting model the division used did not play a role in the legislators’ decision to cut the division’s budget. Furthermore, the auditors suggested that the division’s strategy for privatizing support coordinators was judicious in light of further budget cuts.
The letter also alleged conflicts of interest within the division. The auditors reviews all allegations and found that the Department of Human Services had examined each claim and determined how each claim could be managed. Given the department’s awareness and action, the auditors saw no reason to pursue the matter further.
Wednesday, August 19th, 2009
The Government Operations and Political Subdivisions Interim Committee met to discuss the newly restructured Privatization Policy Board. The board is made up of legislators, private employers, appointees from the Governor, and UPEA. The intent of the board is to make an inventory of state services and determine if those services compete with the private sector. Recommendations from the board will be sent to the governor.
Senator Goodfellow, who chairs the policy board, said the board will send a survey to state agencies with questions about services that could be privatized. Goodfellow said the board is not yet complete as they are waiting for the governor to appoint two more people.
Representative Craig Frank, R-Cedar Hills, who sponsored legislation to reorganize the Privatization Policy Board, stated that privatization is critical and wants to know the role government has in the private sector. Frank also wants to see the board move quickly and that he is anxious to see the proposals that will be sent to the Governor.
UPEA is tracking this issue very closely and will be attending all Privatization Policy Board meetings. Privatization is a big issue and we want all public employees to be informed about what is happening. We will continually post updates on http://www.utahpublicemployeesassociation.blogspot.com/ if new information becomes available.
Legislative Audit Subcommittee
Listen to Audio
UPEA monitored discussions during the Legislative Audit Subcommittee to prepare for the 2010 Legislative Session. This subcommittee reviews audits requested by legislators to help them make policy decisions. The media widely reported that audits revealed a major liability in the Medicaid Bureau of Program Integrity. However, the subcommittee also reviewed audits dealing with the courts, the Department of Technology Services, and DSPD. Overall, the audits revealed concerns with upper management and organizational communication.
However, the DSPD audit, A Review of Allegations Made Concerning The Division of Services for People with Disabilities, could not substantiate allegations submitted anonymously. Specifically, the letter alleges that the division’s forecasting process is inaccurate and that the current situation for privatizing Support Coordinators was not vetted properly.
The Legislative Auditor General suggested that further review of the allegations was unnecessary because the forecasting model the division used did not play a role in the legislators’ decision to cut the division’s budget. Furthermore, the auditors suggested that the division’s strategy for privatizing support coordinators was judicious in light of further budget cuts.
The letter also alleged conflicts of interest within the division. The auditors reviews all allegations and found that the Department of Human Services had examined each claim and determined how each claim could be managed. Given the department’s awareness and action, the auditors saw no reason to pursue the matter further.
Wednesday, August 19th, 2009
The Government Operations and Political Subdivisions Interim Committee met to discuss the newly restructured Privatization Policy Board. The board is made up of legislators, private employers, appointees from the Governor, and UPEA. The intent of the board is to make an inventory of state services and determine if those services compete with the private sector. Recommendations from the board will be sent to the governor.
Senator Goodfellow, who chairs the policy board, said the board will send a survey to state agencies with questions about services that could be privatized. Goodfellow said the board is not yet complete as they are waiting for the governor to appoint two more people.
Representative Craig Frank, R-Cedar Hills, who sponsored legislation to reorganize the Privatization Policy Board, stated that privatization is critical and wants to know the role government has in the private sector. Frank also wants to see the board move quickly and that he is anxious to see the proposals that will be sent to the Governor.
UPEA is tracking this issue very closely and will be attending all Privatization Policy Board meetings. Privatization is a big issue and we want all public employees to be informed about what is happening. We will continually post updates on http://www.utahpublicemployeesassociation.blogspot.com/ if new information becomes available.
Wednesday, August 19, 2009
Retirement Taskforce
UPEA would like to take this opportunity to bring you up-to-date on the Association’s efforts concerning the critical issues of retirement and health care. Over the past four months, a taskforce of UPEA members appointed by the UPEA State Board of Directors, have been meeting to interview legislative leaders, state retirement officials, health insurance experts, and others in order to prepare for the upcoming Legislative Session. The time has been well spent.
As you know, the state retirement fund has experienced significant losses due to the recession. For the system to remain solvent it must be at least 80% funded. Currently the retirement system is about 87% funded.
In order to address the losses, some organizations, like the League of Cities and Towns have proposed a myriad of solutions such as suspending the 401(k) contribution, extending the vesting period, and transitioning the public safety / firefighter years of service from 20 years to 25 years. We believe that such proposals are premature.
UPEA will join the Utah Education Association (UEA) and the Utah School Employees’ Association (USEA) in issuing a joint statement which opposes any long term changes to the retirement system based on a temporary drop in the investment fund.
The UPEA taskforce is also closely monitoring health care reform on the state and national level and will be producing a series of position papers.
UPEA is adamant about preserving your retirement benefits. The Utah Retirement building is named after UPEA’s founder and first President Leonard W. McDonald, the architect of the Utah State Retirement System. We the leadership of UPEA intends to uphold this legacy.
As you know, the state retirement fund has experienced significant losses due to the recession. For the system to remain solvent it must be at least 80% funded. Currently the retirement system is about 87% funded.
In order to address the losses, some organizations, like the League of Cities and Towns have proposed a myriad of solutions such as suspending the 401(k) contribution, extending the vesting period, and transitioning the public safety / firefighter years of service from 20 years to 25 years. We believe that such proposals are premature.
UPEA will join the Utah Education Association (UEA) and the Utah School Employees’ Association (USEA) in issuing a joint statement which opposes any long term changes to the retirement system based on a temporary drop in the investment fund.
The UPEA taskforce is also closely monitoring health care reform on the state and national level and will be producing a series of position papers.
UPEA is adamant about preserving your retirement benefits. The Utah Retirement building is named after UPEA’s founder and first President Leonard W. McDonald, the architect of the Utah State Retirement System. We the leadership of UPEA intends to uphold this legacy.
Friday, July 10, 2009
Pension System Options
The national financial crisis has caused pension systems and 401(k)s to lose money. The Utah Retirement System (URS) lost about $4 Billion last year. During the upcoming 2010 Legislative Session, URS may ask the legislature to increase Utah public employee contribution rates by 3 to 4 percent ($80-$100 million). However, lawmakers will decide between various options that affect public employee retirement benefits.
UPEA has been monitoring potential changes to the retirement system. URS presented several options for consideration during a February 5, 2009 Legislative Independent Entities Appropriations Subcommittee Meeting (click here to hear audio).
URS’s legal council, Dan Anderson said, “URS isn't making any recommendations regarding changes, they are only bringing forth information as a place to begin discussions for making adjustments to the system, if desired by the committee.”
Some of the adjustments that could be considered are listed and explained below. Please keep in mind that none of these proposals are final. However, as public employees, we need to be educated on each of the alternatives so we can make a difference in the process.
Suspend/Lower Post Retired (“Double Dippers”) contribution to 401(k).
o Utah currently has a very generous post-retirement (“double dipping”) benefit policy. There is political momentum to change the benefit for the employees that “double dip” to save money. The concern is whether or not any changes can be legally made to the current employees using the post-retirement benefits.
Extend final Average Salary Period (for example from 3 years to 5 years).
o This proposal would allow the salary averages of the highest 5 years to be used in calculating your retirement benefit.
UPEA has been monitoring potential changes to the retirement system. URS presented several options for consideration during a February 5, 2009 Legislative Independent Entities Appropriations Subcommittee Meeting (click here to hear audio).
URS’s legal council, Dan Anderson said, “URS isn't making any recommendations regarding changes, they are only bringing forth information as a place to begin discussions for making adjustments to the system, if desired by the committee.”
Some of the adjustments that could be considered are listed and explained below. Please keep in mind that none of these proposals are final. However, as public employees, we need to be educated on each of the alternatives so we can make a difference in the process.
Suspend/Lower Post Retired (“Double Dippers”) contribution to 401(k).
o Utah currently has a very generous post-retirement (“double dipping”) benefit policy. There is political momentum to change the benefit for the employees that “double dip” to save money. The concern is whether or not any changes can be legally made to the current employees using the post-retirement benefits.
Extend final Average Salary Period (for example from 3 years to 5 years).
o This proposal would allow the salary averages of the highest 5 years to be used in calculating your retirement benefit.
Make COLAs Discretionary/ Delay COLA.
o COLA’s on retirement disbursements could potentially be deferred until a specific anniversary date of retirement (for example 3 years after retiring) or until a retiree reaches a certain age (for example 65).
Increase the vesting period.
o Vesting periods for new employees could potentially increase (from 4 years to 6 years).
Put a minimum age condition on the 30 year benefit.
o One of the suggestions is to change the minimum age that an employee can retire without a penalty (55, 57, 60,etc…). The question is how would this apply to current employees? Would they be grandfathered?
Partial benefit payments until a certain age.
o This proposal would allow for an employee to receive partial retirement benefits until they reach a certain age (phased retirement).
Reduce the multiplier.
o Reducing the retirement multiplier (number of years x 2% x 3 highest average salaries) from 2% to 1.9%. The question is whether current employees would be grandfathered?
Increase 20 year public safety and firefighter requirement to 25 years.
o Would current employees be grandfathered?
Put a minimum age condition on the 20 year public safety and firefighter benefit (48, 50, 52, etc…).
o One of the suggestions is to change the minimum age that an employee can retire without penalty (48, 50, 52,etc…). Would current employees be grandfathered?
Change to the contributory system. Employees are currently on the non-contributory system.
o Such a move would allow employees to participate in funding their retirement benefit. Such a move would shift some of the risk to the individual.
Create a hybrid contributory/non-contributory system.
o This would allow the system to potentially have the employee participate in funding their retirement benefit, while still having part of their benefit be made up of the non-contributory system. (for example, employees might contribute 1% - 3% of their own salary to the pension).
Make the retirement benefit optional – employees can choose how they would like to participate at the time of hire.
Turn the defined benefit system (pension) into a defined contribution (401 (k)) system.
Basing your retirement eligibility by age + years of service.
o This proposal would say that you would need to follow the rule of 85 (or 90, 95, etc…). This would mean that you would need to have 30 years of service if you were to retire at the age of 55 (age + years of service = 85).
UPEA has been very busy this summer working on the retirement issues. The UPEA State Board recently created a taskforce that is discussing potential legislative action that may affect employee pensions and 401(k)s.
In addition, UPEA is spearheading a political training program this summer. This program will help public employees understand the political process, and empower public employees to institute positive change. The training will be conducted in a 3-part series that includes “Politics 101”, “Grassroots: How You Can Make A Difference”, and “How to Become A Delegate”. We will begin scheduling classes throughout the agencies this summer. If you would like to have UPEA come to a staff meeting, or come present at your worksite, please call 1-800-224-8732.
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