What Are the Key State and Federal Issues for Public Pensions to Watch in 2024?
NCPERS held a webinar on December 5 to discuss the legislation and state activities that could impact public pensions in the coming year.
By: Lizzy Lees, NCPERS
During NCPERS' December 5 webinar, “State and Federal Legislation Impacting Public Pensions,” panelists Tony Roda, partner at Williams and Jensen, and Kendal Killian, executive director of the National Public Pension Coalition (NPPC), provided an overview of the legislation that could impact public pensions in the coming year, discussed notable developments in 2023, and previewed the upcoming Legislative Conference. NCPERS Executive Director and Counsel, Hank Kim, moderated the conversation.
After a ‘Neutral' 2023, Positive Momentum Building Across States
Reflecting on 2023, Killian viewed the year as ‘neutral.' Despite traditional threats lessening and the increasing opportunities for pension advocates nationwide, the closure of North Dakota's pension fund was a major negative. In closing the plan, legislators passed the most expensive bill in the history of the state, and it will ultimately exasperate the recruitment and retention crisis.
However, there was a lot of positive momentum as states and localities look to reopen their pensions or expand benefits. Michigan leaders are spending money on ads to attract individuals to various public safety agencies, but they're still struggling to see results as they compete with localities with active pension plans. As a result, momentum to reopen the state's plan has been building.
According to Killian, in Alaska the closure of the pension fund led to severe public employee shortages, particularly affecting public safety roles due to the absence of defined benefit pensions and Social Security. Senate Bill 88 is moving forward with strong support to reopen the pension system and address the state's critical employee crisis. During NCPERS 2024 Legislative Conference, experts will take a closer look at what's happening in Alaska and share tactics to help other states and localities preserve and defend their plans.
How Did the 2023 Midterm Elections Impact Public Pensions?
According to Roda and Killian, the midterm elections had some impact on the public pension industry across various states without causing significant shifts in majority control. One noteworthy outcome was in Virginia, where pension advocates performed well. Additionally, the re-election of Governor Andy Beshear in Kentucky, a strong supporter of public employee pensions, is significant considering Kentucky's funding challenges.
However, in Michigan, several legislators who are pension allies won their mayoral races, which means the State House is now tied between Republicans and Democrats. The delay in refilling these seats until April may temporarily halt legislative progress, reducing the Democratic advantage in the interim. Nonetheless, optimism remains high that these seats will be filled by pension advocates.
Federal Issues Impacting Public Pensions
The regulatory guidance linked to the SECURE Act 2.0 was a key issue in 2023, said Roda. There were a number of statutes that were not clear or needed technical corrections. The Roth mandate on catchup contributions presented a more urgent challenge as this was set to take effect January 1, 2024. Luckily, the implementation deadline was pushed back two years to provide plans the time needed to comply.
The Ways and Means Committee recently held a field hearing on WEP and GPO—ongoing priorities in the public pension community. The field hearing, while poorly attended, did indicate some level of seriousness at the Chairman's level, but the big hurdle has always been the cost of a full repeal, Roda said. NCPERS expects SECURE 2.0, WEP, and GPO to be a focus in 2024.
Another area to watch is the Office of Management and Budget's recently proposed rule on pension cost principles. This could be a tremendous issue for certain states as well in the coming year, Roda said. NCPERS submitted comments on this issue in early December.
Many public pension funds contract with private sector vendors to verify participant death data, but in light of several high-profile data breaches, this has been—and will continue to be—a key issue to watch as funds explore secure sources to obtain this information. Roda will do a deep dive on the various options—such as the Social Security Administration's “full” master death files—during NCPERS Legislative Conference.
Looking Ahead: 2024 State and Federal Preview
Looking ahead, Killian emphasized the significant opportunity to reopen the defined benefit plan in Alaska, where the situation has been influenced by the implementation of rank-choice voting. This change has allowed caucuses to move beyond strict partisanship, leading to the organization of a Senate caucus in Alaska rallying around the reopening of public employee pensions. There's a sense of momentum and progress in this area.
“While the second year of the biennium tends to be quieter in some states, there remains a vigilant watch to ensure there are no potential threats to public employee pensions,” Killian noted. Other than Alaska, he's focused on Michigan, Oklahoma, Connecticut, Colorado, and Arizona in 2024.
Panelists agreed that environmental, social, and governance (ESG) issues will continue to be a focus at both the local and national level. In Oklahoma, a retired state employee recently filed a temporary injunction against Treasurer Todd Ross to prevent the implementation of the Energy Discrimination Elimination Act. “This is going to be a really important case to watch,” Killian noted.
Legislatively, the House has approved a number of ESG-limiting bills, but the Senate has no appetite for them, Roda said. “ESG and ‘woke capitalism' are tremendous fundraising tools that people and groups are using, and I think it remains a hot topic.”
Resources for Public Pensions
To further explore the latest state and federal issues that may impact your fund, don't miss NCPERS 2024 Legislative Conference! Taking place from January 22-24 in Washington, DC, this conference offers the unique opportunity to help shape the public pension industry's legislative strategy and have your voice heard. View the agenda to learn more.
The Legislative Conference is held in conjunction with NCPERS Pension Communications Summit, scheduled for January 21-22 in Washington, DC. Attendees will benefit from expert insights on enhancing member engagement, best practices in external communications, and much more. Explore the agenda here.
Attend both events and save $100! Don't wait—early bird pricing ends January 5.