NCPERS Public Safety Conference October 2016 Williams & Jensen, PLLC
Legislative Issues • WEP • Normal Pension Cost • PEPTA • Annuity Accumulation Plan Williams & Jensen, PLLC
Windfall Elimination Provision • Part of federal law since 1983 • First tranche (building block) of SS benefit reduced from 90% of average monthly earnings to 40% • Repeal efforts continue (S. 3303 for public safety) • More targeted approach Williams & Jensen, PLLC
WEP, cont. • H.R. 711, by Ways and Means Committee Chairman Kevin Brady (R‐TX) • Two pieces (rebate for current beneficiaries and new proportional‐based formula for future beneficiaries) • Questions raised: Why everyone? What about the substantial earnings test (important for public safety) Williams & Jensen, PLLC
Normal Pension Cost • H.R. 5427, Rep. Robert Dold (R‐IL) • Attempted in 2015 on Every Student Succeeds Act (revision of No Child Left Behind) • Stopped because of unintended consequences Williams & Jensen, PLLC
Normal Cost, cont. • Would affect the use of ESEA dollars by states • No state may require an LEA to pay for more than normal cost • Normal cost ≠ accrued unfunded liabilities Williams & Jensen, PLLC
Public Employee Pension Transparency Act (PEPTA) • S. 2381, Puerto Rico Assistance Act, Finance Committee Chairman Orrin Hatch (R‐UT) • H.R. 4822, Rep. Devin Nunes (R‐CA) • State and local reporting on funding status to federal government for the first time Williams & Jensen, PLLC
PEPTA , cont. • Annual reports to U.S. Treasury Department • Two sets of calculations: 1) Current assumed rate of return 2) Supplemental report based on FMV of assets and U.S. Treasury obligation yield curve Williams & Jensen, PLLC
PEPTA, cont. • Many happy returns… • Single year returns are one thing • 3‐year, 5‐year, 10‐year, 15‐year, and 20‐year averages are something else • Heightened degree of political pressure Williams & Jensen, PLLC
Annuity Accumulation Plan • Also included in S. 2381, the Puerto Rico Assistance Act • Sponsor “may” establish an annuity accumulation retirement plan • However, this new proposed plan is being positioned as a replacement for DB plans Williams & Jensen, PLLC
Annuity Plan, cont. • Individual, deferred, fixed‐rate annuities (annual) • Only employer contributions allowed • Aspirational ceilings of 30% for public safety; 20% for others; higher limits for certain ages Williams & Jensen, PLLC
Annuity Plan, cont. Concerns: • Replacement income (inconsistent contributions) • Survivor and disability benefits (public safety) • New costs: (1) aggregation costs (outside provider or sponsor/fund); (2) transition costs (similar to DB to DC); and (3) new determination letter Williams & Jensen, PLLC
PROMESA • Final law covers only public plans in Puerto Rico • But, opportunities to broaden discussion • Fiscal plan, recommendations on alternatives to pension funding, Congressional Task Force, main analysis, and GAO studies Williams & Jensen, PLLC
Looking Ahead Williams & Jensen, PLLC
Lame‐Duck Session • Start with election results • Viable issues for the short‐term (coal miners, DC retirement issues, composite plans for multi‐employer plans) Williams & Jensen, PLLC
2017‐18 • New Congress (115 th ) • New President • Agenda Williams & Jensen, PLLC
2017‐18 (Agenda) • Tax Reform (ultimate catch‐all tax bill) • Social Security reform/modernization • Retirement‐related legislation • ACA reform (early avenue for Medicare) Williams & Jensen, PLLC
Contact Information Tony Roda, Partner Williams & Jensen, PLLC 701 8 th Street, NW, Suite 500 Washington, DC 20001 (202) 659‐8201 ajroda@wms‐jen.com Williams & Jensen, PLLC
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