Promoting Defined Benefit Pension Plans

Hank Kim, Esq.

National Conference on Public Employee Retirement Systems

Presentation Overview

• Introduction to National Conference on Public Employee Retirement Systems

• Past battles to preserve DB

• Battles ahead and applying lessons learned

• The new language of DB

• Wrap up and Q & As

NCPERS

• Largest nonprofit trade association representing 500 public sector DB plans

• Who we ARE:– Advocacy– Research– Education

NCPERS Position

• All workers (public and private) should have a traditional pension benefit (DB plan) as their primary pension plan

• DB plans are good for governments, employees, taxpayers and the economy

Test Your Knowledge of Public Pensions

• How many public pension plans are there in the United States?

a. 78

b. 472

c. 2656

Test Your Knowledge of Public Pensions

• How much money do public pension plans control?

a. $300 billion

b. $3 trillion

c. $30 trillion

Test Your Knowledge of Public Pensions

• How many public servants are there in the United States?

Test Your Knowledge of Public Pensions

• How many public servants are there in the United States?

a. 14.1 million active/6.9 million retired

Test Your Knowledge of Public Pensions

• What is the average pension benefit of a retired public servant?

Test Your Knowledge of Public Pensions

• What is the average pension benefit of a retired public servant?

a. $20,400 per year

Test Your Knowledge of Public Pensions

• How many Fortune 500 companies offer DB plans?

a. none

b. Less than half

c. More than half

Public Pensions

There has to be a balance:

• employer contributions,

• employee contributions,

• investment returns, and

• benefit-funding ratio

Past Battles

Defined Benefit to Defined Contribution

• West Virginia Teachers (1990)

• Michigan State Employees (1997)

• Alaska (July 1, 2006)

Past Victories

DC to DB

• North Dakota (1977)

• Nebraska (2000)

• West Virginia Teachers (2005)[61% voted to return to DB plans]

Past Victories (cont.)

Preserving DBs

• Florida (2000) - optional

• California (2005)

• Colorado (2006)

The Battles Ahead

Three Alarms – direct threats (5)

Alaska – working to overturn

Arizona – DC bills introduced

Kentucky – commission to review benefits

Rhode Island – state-wide two-tier system proposed plus Providence has DC proposal

Utah – DC proposal for select new hires

The Battles AheadTwo Alarms – significant threat (12)

California

Hawaii

Illinois

Michigan

Minnesota

Montana

New Jersey

Oklahoma

Ohio

Oregon

Virginia

Wisconsin

The Battles Ahead

One Alarm – potential threat (19)Alabama Colorado ConnecticutIndiana Kansas LouisianaMaryland Massachusetts Mississippi Nevada New Hampshire New MexicoNew York North Carolina Pennsylvania South Carolina Texas WashingtonWest Virginia

Are you concerned?

• 36 states’ public pension systems are in play today!

California Battle-Lessons Learned

ELIMINATE DB PLANS:

• Governor proposed ballot initiative

• Legislator introduced bill

• Coalition of concerned groups

• Powerful DB message

• Stayed on message

Alaska Battle-Lessons Learned

Eliminate DB Plans (7/06):• Legislation (short session)

• Legislature kept in session

• Groups slower to organize

• Message not as clear

Colorado Battle-Lessons Learned

• Bill to eliminate DB plans

• Ballot initiative proposed

• Groups overcame differences and formed an effective coalition

• Got buy-in from all stakeholders

• Legislative compromise deflated ballot

initiative

Download DB Tools

www.NCPERS.org

• NCPERS Research

• Fact sheets

• Myths and Facts

• Testimonials

• Updated information

Download DB Tools

www.NCPERS.org

• NCPERS Research

• Fact sheets

• Myths and Facts

• Testimonials

• Updated information

Download DB Tools

www.NCPERS.org

• NCPERS Research

• Fact sheets

• Myths and Facts

• Testimonials

• Updated information

Download DB Tools

www.NCPERS.org

• NCPERS Research

• Fact sheets

• Myths and Facts

• Testimonials

• Updated information

Download DB Tools

www.NCPERS.org

• NCPERS Research

• Fact sheets

• Myths and Facts

• Testimonials

• Updated information

Messages That Work

• Elimination of death & disability benefits

• Traditional pensions are a tried and true system that benefit taxpayers

• New system will be costly and chaotic

Messages That Work

Use analogies and best face of public service :

• mortgage

• public safety heroes

What’s the Problem?

Total unfunded liability of public funds is $350 billion (2,656 systems)

Americans owe $8.8 trillion in mortgages!

Should we abolish home mortgages?

What’s the Problem?

Our plans are funded at 87%.

If you had 87% of your mortgage paid off – would anyone consider you in financial trouble?

Things to Remember

• Not a debate on the merits of DBs—it’s a media battle!

• Educate constituents early and often

• Build coalition with other stakeholders

• Have emotional stories and sympathetic figures

• Stay on message

NCPERS 2007 Educational Programs

Legislative ConferenceFebruary 5-7 in Washington, DC

Trustee Educational Conference May 18-19 in Honolulu, HI

Annual Conference May 20-24 in Honolulu, HI

Program for Advanced Trustee StudiesJuly 26-27 in Cambridge, MA (HLS)

Public Sector Health Care Symposium October 1-3 in Chicago, IL

Public Safety Employee Pension & Benefits ConferenceOctober 14-17 in Palm Springs, CA

For More Information

NCPERS444 North Capitol Street, NW, Suite 221Washington, DC 20001info@NCPERS.org1-877-202-5706