Tag: National Institute on Retirement Security

How Pension Plans Evolved Out of the Great Financial Crisis

Mary Pat Campbell

Link: https://www.ai-cio.com/news/how-pension-plans-evolved-out-of-the-great-financial-crisis/

Excerpt:

A recent webinar held by the National Institute on Retirement Security, in conjunction with consulting firm Segal and Lazard Asset Management, reviewed the report “Examining the Experience of Public Pension Plans Since the Great Recession,” which examines how public retirement plans weathered the period’s market and made subsequent changes to public pension funds to ensure their long-term sustainability.

Most plans recovered their losses between 2011 and 2014, three to six years after the market bottom. Despite the recession and subsequent loss of value, plans continued to pay out over a trillion dollars in benefits to subscribers during the period.

Todd Tauzer, vice president at Segal, says that since 2008, the models and risk assessment strategies of public plans have evolved greatly. Tauzer says, “funding status alone does not indicate health of a public pension, after all, one cannot see the underlying assumptions used. A plan’s funding status can be measured in many different ways, and the ways we measure can change over time.”

“Plans today are on a much stronger measurement of liability than they were 15 years ago,” according to Tauzer. Adjustments to the assumption of the models in mortality, the assumed rate of return, general population counts, and the assumed rate of inflation are a few of the assumptions modified which give greater clarity into pension health post-GFC.

Author(s): Dusty Hagedorn

Publication Date: 17 Oct 2022

Publication Site: ai-CIO

Examining the Experiences of Public Pension Plans Since the Great Recession

Mary Pat Campbell

Link: https://www.nirsonline.org/reports/greatrecession/

PDF of report: https://www.nirsonline.org/wp-content/uploads/2022/09/compressedExamining-the-Experiences-of-Public-Pension-Plans-Since-the-Great-Recession-10.13.pdf

Webinar slides: https://www.nirsonline.org/wp-content/uploads/2022/09/FINAL-Great-Recession-Retro-Public-Webinar.pdf

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This report finds that state and local government retirement systems on the whole successfully navigated the 2007 to 2009 Global Financial Crisis. Moreover, public retirement systems across the nation have adapted in the years since the recession by taking actions to ensure continued long-term resiliency.

Examining the Experiences of Public Pension Plans Since the Great Recession is authored by Tyler Bond, NIRS Research Manager, Dan Doonan, NIRS Executive Director, Todd Tauzer, Segal Vice President and Actuary, and Ronald Temple, Lazard Managing Director and Co-Head of Multi-Asset and Head of U.S. Equity.

The report finds:

  • The majority of public pension plans recovered their pre- recession asset levels within six years, while continuing to pay over a trillion dollars in benefits. In recent years, public plans have reported record-high asset levels.
  • Discount rates, or the assumed rate of return on investments, have broadly decreased from eight to seven percent for the median public pension plan, based on actuarial and financial forecasts of future market returns.
  • Generational mortality tables, possible today with more advanced financial modeling software, have been broadly adopted by nearly all large public plans and future longevity improvements are now incorporated into standard financial projections.
  • Many public plans have shortened amortization periods, or the period of time required to pay off an unfunded actuarial accrued liability, to align with evolving actuarial best practices. Tightening amortization periods, akin to paying off a mortgage more quickly, has had the effect of increasing short- term costs. In the long run, plans and stakeholders will benefit.
  • The intense focus on public plan investment programs since the Great Recession misses the more important structural changes that generally have had a larger impact on plan finances and the resources necessary for retirement security.
  • Plans have adjusted strategic asset allocations in response to market conditions. With less exposure to public equities and fixed income, plans increased exposure to real estate, private equity, and hedge funds.
  • Professionally managed public defined benefit plans rebalance investments during volatile times and avoid the behavioral drag observed in retail investment.

Author(s): Dan Doonan, Ron Temple, Todd Tauzer, Tyler Bond

Publication Date: October 2022

Publication Site: NIRS

Fortifying Main Street: The Economic Benefit of Public Pension Dollars in Small Towns and Rural America

Mary Pat Campbell

Link: https://www.nirsonline.org/reports/mainstreet2022/

PDF: https://www.nirsonline.org/wp-content/uploads/2022/07/FINAL-compresses-fortifyingmainstreet2022_small-compressed.pdf

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The report’s key findings are as follows:

  • Public pension benefit dollars represent between one and three percent of GDP on average in the 2,922 counties studied.
  • Rural counties have the highest percentages of their populations receiving public pension benefits.
  • Small town counties experience a greater relative impact in terms of both GDP and total personal income from pension benefit dollars than rural or metropolitan counties.
  • Rural counties see more of an impact in terms of personal income than metropolitan counties, while metropolitan counties and rural counties see an equivalent impact in terms of GDP.
  • Counties that contain state capitals are outliers from other metropolitan counties, likely because there is a greater density of public employees in these counties, most of whom remain in these counties in retirement.
  • On average, rural counties have lost population while small town counties and metropolitan counties have gained population in the period between 2000 and 2018, but the connection between population change and the relative impact of public pension benefit dollars is weak.

Author(s): Dan Doonan and Tyler Bond from NIRS, Nathan Chobo from Linea Solutions Inc.

Publication Date: July 2022

Publication Site: National Institute on Retirement Security

Stark Inequality: Financial Asset Inequality Undermines Retirement Security

Mary Pat Campbell
Stark Inequality: Financial Asset Inequality Undermines Retirement Security

Link to full report: https://www.nirsonline.org/wp-content/uploads/2021/08/Stark-Inequality-F2.pdf

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Inequality in the ownership of financial assets both persists and deepens over time. The top five percent of Baby Boomers by net worth owned a greater percentage of that generation’s financial assets in 2019 (58 percent) than in 2004 (52 percent).

Inequality in the ownership of financial assets is consistent across generations. In 2019, the top 25 percent by net worth of Millennials, Generation X, and Baby Boomers owned three-quarters or more of their generation’s financial assets.

Financial asset ownership is highly concentrated among white households. In 2019, white households in all three generations owned three-quarters or more of their generation’s financial assets. Ownership is especially concentrated among white households in the top 25 percent of net worth.

Both mean and median financial assets were significantly higher for white households in 2019 than Black or Hispanic households.

A range of potential solutions exists to address this stark inequality including strengthening and expanding Social Security, protecting pensions, increasing access to savings-based plans for low-income workers, and reforming retirement tax incentives.

Author(s): Tyler Bond

Publication Date: September 2021

Publication Site: National Institute on Retirement Security

Opinion: Pension plans — and the people they support — are in danger

Mary Pat Campbell

Link: https://www.washingtonpost.com/opinions/letters-to-the-editor/pension-plans–and-the-people-they-support–are-in-danger/2021/02/28/3b1282fe-777c-11eb-9489-8f7dacd51e75_story.html

Excerpt:

Contrary to the Feb. 18 editorial “Congress needs to focus its covid relief bill — on covid relief,” multiemployer pension plans have faced significant additional challenges caused by the ongoing global pandemic. It has jeopardized these plans’ ability to deliver hard-earned benefits to more than 1 million enrolled retirees and workers and must be addressed by lawmakers now. The shutdown of the U.S. economy has greatly amplified the financial struggle of these plans. Hundreds of employers are facing bankruptcy and cannot contribute to multiemployer pension funds; employees have lost their jobs; and the sharp drop in interest rates hit plans hard. Senior citizens and essential workers are disproportionately impacted by both the effects of the coronavirus and the multiemployer pension crisis.

As the United States looks to reopen and rebuild, maintaining the solvency of the multiemployer pension system will be key to economic recovery. The National Institute on Retirement Security concluded that the $44.2 billion in private pension benefit payments paid to retirees of multiemployer plans in 2018 supported $96.6 billion in overall economic output in the national economy and an estimated $14.7 billion in total tax revenue. The country can ill-afford a reduction in these revenue streams during the recovery period.

Author(s): James Hoffa

Publication Date: 28 February 2021

Publication Site: Washington Post

Retirement Insecurity 2021 | Americans’ Views of Retirement

Mary Pat Campbell
Retirement Insecurity 2021 | Americans’ Views of Retirement

Press Release: https://www.nirsonline.org/2021/02/amid-political-division-americans-united-in-retirement-worry/

Webinar recording:

Webinar slides: https://www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Public-Opinion-Webinar-Slides-Feb-25-2021.pdf

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This new national survey of working-age Americans also reveals that the COVID-19 pandemic has exacerbated worries about achieving financial security in retirement.

More than half of Americans (51 percent) say that the COVID-19 pandemic has increased concerns about achieving financial security in retirement. And the COVID-19 concern is high across party lines: 57 percent among Democrats; 50 percent for Independents; and at 44 percent for Republicans.

Author(s): Dan Doonan, Kelly Kenneally, Tyler Bond

Publication Date: 17 February 2021

Publication Site: National Institute on Retirement Security