On March 17, the Irish and "Irish-at-heart" happily celebrate St. Patrick's Day, wear the green and look forward to a productive twelve months, after which the festivities can begin anew. Yet March 17 this year brought gloomy headlines for some individuals. In "New pension scheme will see teachers work to 68 in Northern Ireland," Belfast Telegraph journalist Rebecca Black writes that critics of a newly approved plan to increase employee contributions and push back when an educator can retire will make life difficult for new entrants to the job market. For the one out of five teacher graduates who are able to secure employment, they will be asked to pay "9.6%, well above the rate for a civil service pension, and with employer contributions of 13%, well below the rate for a civil service pension." Beyond changes to benefit terms, there are some who offer that teachers burn out by their late 50's and that's why "Most teachers retire by 60." Being asked to work for almost a decade more could be a real hardship.
In the United States, multiple public employee retirement plans have been or are in the process of being examined, restructured, reduced or otherwise reformed. Kentucky State legislators just voted to create a task force to investigate how best to close a funding deficit. As of mid-year, the gap "stood at $14 billion." This step came in the aftermath of a decision not to issue $3.3 billion in pension obligation bonds. See "Senate passes bill to study state's underfunded teacher pension plan" (KY Forward, March 11, 2015).
The State of New Jersey had similarly set up a task force to provide insights into current funding woes and recommend how to move forward. In "A Roadmap to Resolution" (February 24, 2015), the New Jersey Pension and Health Benefit Study Commission urges the freezing of existing retirement plans, the creation of a cash balance plan instead and a unification of benefit plan management to encompass both state and local municipal obligations.
Accounting changes will likely accelerate a further in-depth examination of other retirement and health care plans. According to "Why Some Public Pensions Could Soon Look Much Worse" (Governing, March 17, 2015), recent accounting rule changes - promulgated by the Governmental Accounting Standards Board ("GASB") - force dozens of plans to report "dramatic changes" that reveal significantly larger deficits. Using 2013 and 2014 data, magazine researchers examined 80 public plans in an effort to quantify the impact of using GASB 25 versus GASB 67. The results are telling. Click here to see for yourself how much of a difference ensues due to the now prevailing reporting regime.
As state and municipal plans seek to close serious funding gaps, participants may gasp if they are asked to pay more or receive less or both, making the proverbial gold at the end of the retirement rainbow a challenge.