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Public Pension Legislation on Backburner in 2020 and 2021


Last week, NCPERS hosted our semi-annual webcast on state and federal legislation impacting public pensions. Our regular contributors, Bridget Early, executive director of the National Public Pension Coalition (NPPC) and Anthony Roda, partner at the lobbying firm Williams & Jensen, joined executive director Hank Kim for a review of 2020 public pension legislation and a discussion on what we should expect and monitor for 2021.


 

Public Pension Legislation on Backburner in 2020 and 2021


After the attack on the Capitol on January 6, 2021, NCPERS wants to recognize our public servants who have continued to perform their responsibilities amidst great scrutiny and unprecedented terrorism. Our state & local election officials, vote counters, and our public safety officers defending the nation's capital are American heroes! We at NCPERS are proud and honored to serve them.

Last week, NCPERS hosted our semi-annual webcast on state and federal legislation impacting public pensions. Our regular contributors, Bridget Early, executive director of the National Public Pension Coalition (NPPC) and Anthony Roda, partner at the lobbying firm Williams & Jensen, joined executive director Hank Kim for a review of 2020 public pension legislation and a discussion on what we should expect and monitor for 2021.

2020 Legislative Activities and Outcomes

Federal Level

  • CARES Act- In March, Congress passed the CARES Act, which waived minimum distributions for 2020, increased Corona Related Distributions (CRDs) to $100,000 per year, and allowed for greater flexibility on repaying a loan from a pension plan.
  • HELPS- We saw potential changes to the Healthcare Enhancement for Local Public Safety (HELPS) in 2020. The direct payment provision (means that monies must never touch retiree's hands to satisfy this, payment of healthcare premiums must be made directly to the provider) is troublesome for many plans. Plans have wanted to get out of the “middle man” role due to communication complications. Rep. Kendra Horn (D-OK) introduced legislation to repeal the direct payment provision, but unfortunately, she lost her bid for a second term in the 2020 election. However, we have a list of potential sponsors and co-sponsors in the upcoming congress.
  • Congress could introduce separate legislation and double payments to $6,000 per year.
  • We are hoping for a larger retirement bill in 2021, along the lines of the SECURE Act. If so, we would work to include a repeal of the HELPS direct payment provision.

State Level

  • State activities were similar to the federal level- consumed by the pandemic. States pushed a lot of retirement issues to the backburner.
  • NPPC focused on helping pension plans educate members on their benefits, especially after U.S. Senate Majority Leader Mitch McConnell (R) said to let the states go bankrupt.
  • A significant difference between this pandemic and the Great Recession in 2008-2009 is that legislatures are not skipping pension contributions. Many states have kept their commitment to pay their required contribution.
  • Colorado- As a reminder, Senate Bill (SB) 200 passed in 2018 as a compromised effort by all stakeholders to close the pension funding gap. As part of the process, public employees were given a seat at the table. They were able to advocate for themselves and their priorities while working with state legislators toward full funding of PERA. The bill activated auto-triggers to increase employer and employee contributions based on investment returns. Cost-of-living-adjustments (COLAs) were adjusted, and the state added additional payments ($225 million per year) to close the funding gap. However, with the decline in state revenue due to the COVID shutdown, the $225 million payment for 2020 was not made. It's certainly disappointing that in the second year of enactment, Colorado failed to keep its promise. Educating legislators, both incumbents and newly elected, is key. So that they know why these payment provisions exist, the importance of preserving them, and the sacrifices of public employees make to keep plans sustainable.       
 


2021 Legislation Watchlist

Federal Level

  • The last major, unpassed proposal coming out of the Senate provided additional spending for states and localities but prohibited use for public pension plans.
  • A more problematic condition that the Senate may raise again in the 117th Congress is that states had to promise that they would not make changes to their state pension fund that would increase benefits. These conditions are something we will need to watch in 2021.
  • There is likely to be additional work on required minimum distribution.
  • Infrastructure will be a major issue for the Biden Administration. As this issue gets debated, there may be efforts to incentivize public pensions to invest in infrastructure.

State Level

  • Arizona- NPPC expects that legislators will continue to be lobbied by organizations that prioritize ideology over finances.
  • Kentucky- Governor Beshear supports the pension system, but the state senate's views on pensions are different than his.
  • Montana- Republicans now control the governorship and both chambers of the legislature. Policymakers have indicated an interest in pension reform.
  • Oklahoma & Wyoming- NPPC is aware that these states will not be looking to raise revenue, especially in the wake of the pandemic. With the pandemic's impact on state budgets, not increasing revenues could impact what states can spend, including investing in public pensions.
You may also be interested in: Enacting Bipartisan Retirement Reform Package Could Help Us Move Past Acrimony, Biden Plan Identifies Range of Retirement Priorities for New Administration, Oregon Supreme Court Upholds Certain Public Pension Benefit Reductions, and State and Local Governments Have Solid Capacity to Sustain Pensions.
 

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