Update: National Institute on Retirement Security

Transcription

1 Update: National Institute on Retirement Security 24 th Annual NCTR System Directors Meeting Sacramento, CA June 14, 2011 Diane Oakley Executive Director National Institute on Retirement Security

2 Why Increased Focus on Public Sector & Pensions? Seen inaccurate assertions in outsized growth of public sector employment. Middle class jobs in the private sector are disappearing. The share of middle income jobs in the U.S. fallen from 52% in 1980 to 42% in Middle income jobs have been replaced by low income jobs, which now make up 41% of total employment. Source: New American Foundation, Bureau of Labor Statistics, Westwood Capital

3 Private Sector: Lower Income Now, Lower Retirement Security Later Private Sector Workers Participating in Employer Based Retirement Plan by Plan Type, (all workers) Source: New American Foundation, Bureau of Labor Statistics, Westwood Capital Source: New American Foundation, DOL, PBGC, EBRI

4 Wall Street Meltdown Dealt Severe Blow to Middle Class Household net worth declined from $65.7 trillion in the second quarter of 2007 to $56.8 trillion in the fourth quarter of Wealth recovered $8.1 trillion since the first quarter of 2009, due mostly to recovery of stock prices. Source: New American Foundation, Bureau of Economic Analysis

5 Great Recession Fallout on Middle Class: Home Equity & Wealth Home equity makes up a greater share of wealth for the middle class than for wealthy families. For families up to 90 th percentile of net worth, home value makes up 50% of worth. However, much decline since Case Shiller Home Price Index declined by 30%, could fall another 10-20%. Don t forget 23% of all residential mortgages underwater. Source: New American Foundation, Kennickell (2009)

6 Already, Severe Private Sector Shortfall in Retirement Savings The median value of retirement savings for retirees is $45,000. The average retiree has a retirement savings shortfall of $47,732, with larger shortfalls among low-income Americans. Many Americans were relying on rising home values to finance their retirement and have under saved.

7 The Real Retirement Issue? Underfunded Individual Accounts Source: Michael Kitces, The Nerd s Eye View in The New York Times

8 American Retirement Panic Attack 84% Americans Concerned Current Economic Conditions Hurt Retirement Source: National Institute on Retirement Security, Pension and Retirement Security 2011, A Roadmap for Policymakers

9 Private Sector Wants Pensions 81% of Americans Say They Need Pension For Independence, Self-Reliance Source: National Institute on Retirement Security, Pension and Retirement Security 2011, A Roadmap for Policymakers

10 Vast Majority of Public Plans Well Funded Distribution of Funded Ratios for 126 Largest State, Local Pensions, 2010 Funding Ratio (Percent) Source: Center for Retirement Research, Boston College

11 Public Pensions Showing Strong Recovery Change in Combined Assets of State & Local Government Pensions: Source: National Association of State Retirement Administrators

12 Public Pensions Typically Are Shared Funding Responsibility Employee and Employer Pension Contributions, 1982 to 2009 Source: U.S. Census Bureau

13 On Average, Public Pension Benefits Modest, With 30% of Workers Not Eligible for Social Security Source: U.S. Census Bureau

14 New NIRS Issue Brief: Who Killed Private Sector DBs, March 2011 Pensions still make sense for employees and employers. Private sector trending out of DB plans due to funding volatility, regulatory burdens. Several solutions exist to bring back DBs to private sector but takes leadership, action.

15 Regulations, Funding Volatility Kill Private Sector Pensions - Not Costs

16 Regulations, Funding Volatility Kill Private Sector Pensions - Not Costs Corporate vs. Public Pension Funding Levels, Costs Comparison of corporate and public pension funding levels, 2000 to 2010 Comparison of change from prior year in corporate and public pension contributions, 1989 to 2009 Funding Level 120% 80% 60% Corporate * Corporate 40% 100% 20% Public 80% Public 0% -20% * Wilshire, Milliman, and Public Fund Survey *Estimate US Dept of Labor, US Census Bureau, Milliman * Estimate

17 New NIRS Members Only Opinion Research, April 2011 Americans Views of Public Pensions 2011 Key Findings 1. Pension envy rising 2. Some mis-information is sticking 3. Shared funding responsibility increases support 4. Support for modest benefits 5. Understand strengths of pensions 6. Support for government role

18 New NIRS Data Zone Research, May 2011

19 Future Research, Public Pension Model Funding Practices, Summer 2011 Authors: Ilana Boivie, NIRS and Jun Peng, Associate Professor, School of Government and Public Policy, University of Arizona Analysis: Six well-funded public plans to learn practices that resulted in a better financial condition; provides platform for discussion on reform. Plans analyzed: Delaware State Employees Pension Plan Idaho Public Employee Retirement Fund Illinois Municipal Retirement Fund New York State Teachers Retirement System North Carolina s Teachers and State Employees Retirement System Teacher Retirement System of Texas Findings: Expected to focus on following areas: Employer contributions Employee contributions Benefit improvements COLAs Anti-spiking measures Economic assumptions

20 Future Research: DB DC Choice Decisions, Decisions will examine the experience of states that offer their employees a choice of DB or DC plans by Mark Olleman with Milliman. How Teacher Pensions Support Education Policy Goals will examine the role of pensions in providing retirement security, addressing teacher retention and other workforce issues. Look Before You Leap update will discuss issues and trends in changing from defined benefit to defined contribution plans, as well as effects on older workers. Pensionomics update with more state-by-state data to follow in 2012.

21 Media Outreach: Reframing the Debate Jon Meacham and Alison Stewart on PBS Need to Know report on "Out of Balance" study, which finds that public sector workers earn an average of 11% and 12% less.

22 Media Outreach: Reframing the Debate

23 Media Outreach: Reframing the Debate

24 Media Outreach: Reframing the Debate

25 Refuting Inaccurate Media

26 Coming Soon: NIRS Members Only Site Summer 2011

27 Diane Oakley