Decreasing Current Employee Retirement Benefits

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Have you heard of any bills/discussions for the current legislative session seeking to decrease the retirement benefits of current retirees as a means to cut state spending? I have heard this is the next step, since the door was opened last session with the changes for new employees.
No such bill has been files to date. Unfortunately, we have no way of knowing what, if any, changes to the retirement plan might be proposed in the 2011 legislative session. We, like everyone else, will just have to wait and see what happens as the 2011 legislative session progresses.
The Missouri State Employees' Retirement System (MOSERS) administers retirement, Long-Term Disability and Life Insurance according to state statutes. Staff at MOSERS administers the program we have responsibility for according to state law.  We can provide information to legislators and show the impact on employees and the trust fund, but ultimately, decisions about making changes to the retirement plan rest with the legislature and the Governor's office.
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Rumors of a Retirement Incentive with a Medical Incentive Included

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We had heard indications in the past that tied in with the retirement incentive would possibly be a reduced insurance cost. Does this have any current status?
 You are likely thinking of HB 1583 from last year’s (2010) legislative session that did not pass. That bill included a medical incentive in addition to the retirement incentive being offered, but again, that did not pass. HB 305, which has been introduced in the 2011 legislative session, does NOT include a medical incentive. You can read more about that bill in this recent Rumor Central post.
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2011 Legislative Session

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When does the session on the 2011 HBs end? May or June?

The 2011 session of the Missouri Legislature adjourns on May 13, 2011 at 6:00 p.m. Here is a link to other dates that may be of interest to you regarding the 2011 Legislative Session.
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HB 305 (2011 Legislative Session) Would Provide a "Years of Service" Incentive

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Do you have any idea what is being proposed in HB 305 yet? I can't find a what it actually says.
 HB305 is the “2011 State Employee Retirement Incentive Program” and has been introduced by Representative Gatschenberger, and is co-sponsored by Representative Jones. The provisions of the bill, as introduced, are as follows:
  • A “years of service” benefit equal to $1,000 for each year of creditable service not to exceed 20 years of creditable service
  • To be eligible for this benefit, employees must not have been retired previously or terminated for cause, and be eligible for normal retirement (not early retirement) and have at least 10 years of creditable service
  • The “years of service” benefit would be payable by the Office of Administration to the member or member’s beneficiary in 5 equal installments beginning in September 2011 and each September thereafter until all 5 equal installments have been paid
  • Those who terminate on or after December 31, 2010 and retire on or after January 1, 2011 but no later than September 1, 2011 shall be eligible for the benefit
MOSERS will monitor this an all other legislation that may impact our members and keep you informed.
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Governor's Recommended MOSERS Budget

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There is an $8 million reduction in MOSERS in the Gov's budget from the 2011 level. What will this mean for us and our benefits?

MOSERS' FY12 budget request was for $268,840,259 E, which was that same amount that was appropriated for the 2011 fiscal year. It is customary for us to request the same amount as the previous year. As the governor's budget is produced, our appropriation is modified as necessary to reflect both the reductions taken in FTE (the number of full time equivalent staff in the agencies) and any increase or reduction needed to reflect the most recently certified contribution rate for MOSERS. 

For FY12, the governor's recommended amount is $260,902,090 E.  While this is a reduction from last year's amount, it is strictly due to FTE reductions that the state has taken the past few years and is continuing.  The governor DID fully fund the over $6 million necessary to cover the increase in our contribution rate, which rose from 13.81% to 13.97%. The $6M is included in the total appropriation. Because there are fewer employees the total appropriation recommended by the governor is less than we requested. This is a normal part of the budgeting process and there is absolutely no change to your MOSERS benefit.

MOSERS remains stable and secure. Our investment returns in 2010 were positive. We just released them today and you can read about that here. Additionally, the state of Missouri has consistently contributed the amount required to pay your benefits that is recommended by the actuary and certified to the state by the MOSERS board of trustees.
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Increases to Federal Tax Deductions

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Why did my Federal Tax Deduction increase this month?
Two years ago, President Obama signed into law the "Making Work Pay" Tax Credit, which provided a $400.00 tax savings for on income from gainful employment  (but not on retirement income). This resulted in a reduction of federal tax withholdings for retirees even though they weren't eligible for the tax credit. At that time, your monthly tax withholdings were lowered in accordance with the new tax tables if you did not submit a new W4-P increasing your withholding to offset the lower tax table withholding. 
Since the tax credit expired January 1, 2011, the IRS had to adjust the tax table accordingly which may have now significantly increased your federal tax withholding.
We recommend that you check your federal tax withholdings. You may adjust your withholding
to match your estimated tax liability by submitting a new Substitute W4-P form at any time. 
Please note that MOSERS was required to use the changed tax tables, even though we had concerns about the confusion this would create for our retirees. In March 2009, Gary Findlay, MOSERS executive director, sent a letter to Congress, asking for assistance in urging the IRS  to allow MOSERS to use the old table for income that was not eligible for the Making Work Pay Credit. Unfortunately we were not successful in our attempt to avoid this confusion. As a result, starting in the summer of 2009, MOSERS informed members of this upcoming change in newsletter articles in both our active and retiree newsletters. On January 14 of this year, we posted this article on our website reminding members of the changes that were about to occur.
MOSERS regrets the confusion this issue has caused some of our members.

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State Bankruptcy Headlines Cause Unnecessary Alarm

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MOSERS’ Rumor Central has received three similar questions recently all asking about the same thing – state bankruptcies. Here are the questions, followed by MOSERS’ response.
1) Recent news has stated that Congress is considering legislation that would allow states to file bankruptcy thus relieving them from any obligation to pay state employee pensions (see this article).
2) The New York Times today (01/21/11)in article "Path Is Sought for States to Escape Debt Burdens" they stated "...Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides. Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout." Is this likely to happen to Missouri Retirees?
3) Would current retirees' benefits be affected if the state was allowed to declare bankruptcy?
Recent headlines in the national media regarding the possibility of allowing states to declare bankruptcy have caused MOSERS’ members to express concern and question the impact state bankruptcy would have on retirement benefits.  They also want to know what the likelihood is of it happening in Missouri. While I can’t speak for state legislators or the Governor on this issue, I can say that I am not aware of any public official in Missouri expressing interest in the state being permitted to declare bankruptcy.  In what follows I will share my thoughts about the media reports and attempt to address member concerns.
In an op-ed piece in the Wall Street Journal published January 18, 2011, a law professor from the University of Pennsylvania expressed the opinion that states should be permitted to declare bankruptcy.  In the article, a number of sources of other highly questionable opinions were quoted as accepted facts. Sprinkled throughout the article were inflammatory comments about isolated state government and public employee situations that were stated as if they were the common condition rather than exceptions to the rule.
On January 20 an opinion piece (masquerading as news) was published by the New York Times, leveraging off of the Wall Street Journal editorial.  In the on-line edition, the headline was, “A Path Is Sought for States to Escape Their Debt Burdens.”  That article, among other things, suggested that allowing states to file for bankruptcy “could permit them to alter contractual promises to retirees….” The article was then picked up by MSNBC on January 21 but the headline was changed to, “Plans being drawn up to let states declare bankruptcy.”  
After wading through several introductory paragraphs of hype in that article, I eventually found:
“No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor.”
“No state is known to want to declare bankruptcy.”

Those are the clearest expressions of the truth I have seen on this matter.  However, it is also true that “behind the scenes” negotiations take place in the halls of Congress, and I suspect it is that possibility that is concerning our members.  The fact is that permitting state governments to declare bankruptcy would have a devastating impact on the tax exempt bond market. Any state that did declare bankruptcy would face very high interest rates on bond issuances for the foreseeable future and probably lower that state’s bond rating to “junk” status, the lowest possible rating and an indication of a state’s troubled financial status. As was reported in Governor Nixon’s FY2012 budget released last week, Missouri stands as one of only eight states with a “Triple AAA” bond rating, the highest rating available. This means that Missouri has a Triple A rating from all three of rating agencies (Standard and Poor’s, Moody’s Investors Service and Fitch Ratings). Missouri’s public officials take great pride in the fact that the state has been able to maintain that rating through both good times and bad, thus minimizing the bonds’ interest cost to taxpayers when the state does need to borrow funds.
With respect to any retirement program, the keys to a plan’s financial security are 1) ongoing monitoring by an independent actuary (a business professional who deals with the financial impact of risk and uncertainty), and 2) contributions to the plan being made in the amount recommended by the actuary.  Without exception, the state of Missouri has followed those practices, which are the practices mandated by law.
I think that bears repeating. Without exception, the state of Missouri has followed the practice of annually funding the system at the actuarially determined rate. I think it would be inappropriate for me to speculate on the “what-ifs,” the behind-the-scenes congressional negotiations, or the motives of high-profile opinion writers for major news organizations. In the case of the latter, it is becoming increasingly difficult to determine if they are reporting on a crisis or attempting to create a crisis by what they report. The headline distortions mentioned earlier are a prime example.  
For the perspective of a senior fellow at the Manhattan Institute, a conservative think tank, on this issue, see “Why State Bankruptcies May Be a Bad Idea.”
As always, we will continue to monitor what is happening at the federal and state level that potentially impacts the retirement program sponsored by the state for MOSERS’ members and keep you informed to the best of our ability.

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COLAs for Active Employees

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Is COLA only for Retirees? Do actively working employees receive COLA? If so, what is the first payroll check that will reflect the raise? Is there some sort of notification that is sent to employees?
The COLA noted in the article you referenced applies to retirees only.  As noted in the article, by law retirees may receive a COLA between 0% and 5%.
COLAs for active employees are not established by law, but rather through the state budget and appropriations process.  The best source for information about potential COLAs or other pay information will be your agency’s human resources department. 
As you are probably aware, the state is wrestling with budget shortfalls so the administration and legislators are in the process of working out the budget for next fiscal year and making difficult decisions about funding cuts. Any pay plan decisions, such as COLAs, are unlikely but will not be known until the budget for Fiscal Year 2012 (that begins July 1, 2011) is passed by the General Assembly in early May and finalized in June.
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Rumors of "Buy Out Plans"

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Rumors are floating around. Have you heard of any buy out plans for state employees that meet certain criteria?
We are not sure what the term “buy out plans” means in the rumors you have been hearing.  They may be referring to legislative proposals that were proposed in previous years that would provide cash or subsidized medical insurance rates to encourage employees to retire. In order for an incentive to be offered for all MOSERS members, a member of the general assembly would have to file a bill authorizing some sort of incentive. At this point no such legislation has been filed.  We will monitor the legislative session and inform our members of any legislation signed into law that impacts them.
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