The Washington Environment

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2 The Washington Environment The House of Representatives A Crisis of Leadership The Senate The 2016 Election Domestic Hot Button Issues Federal Budget/Debt Limit Immigration Gun Control Planned Parenthood and Gay Marriage Health Care ISIS/ISIL (Iraq, Syria, Iran) The Presidential Election

3 Retirement Headlines Sweeney looks to Washington to solve NJ pension woes. Don t call it a handout. Senate president says. (Politico, 7/29/15) (Illinois) Public pension fund picture looks frightening with unfunded liabilities exceeding net assets (MadisonRecord.com 9/12/15)

4 Public Retirement Assault The Anti-Defined Benefit Message The cost of current DB plans is unsustainable; Plan liabilities are calculated using unrealistically high investment return assumptions and therefore systematically understate the cost of current pension promises; and Public employees should be afraid of unrealistic and unaffordable pension promises.

5 Driving the National Debate Laura and John Arnold Foundation Sustainable Public Finance: $28,071,659 Brookings Institution Center for State and Local Government Excellence George Mason University Foundation Pew Charitable Trusts Reason Foundation The Novim Group Research Foundation of SUNY Urban Institute

6 Annuity Accumulation Plan The SAFE Act Senator Orrin Hatch (R-UT) Title 1 Public Pension Reform Sponsor may establish annuity accumulation plans Individual deferred fixed annuity contracts may be purchased not less frequently than annually Employer may or may not contribute No employee contributions allowed Not introduced in the current Congress, but

7 Public Employee Pension Transparency Act PEPTA Nunes, Ryan and Issa (2013) State and local reporting to Treasury - First time in history Failure to comply = No Federal tax-exempt bonds Annual reports to Treasury Two sets of numbers: current assumed rate and supplement based on Treasury obligation yield curve Not introduced in the current Congress, but

8 H.R. 711 Equal Treatment for Public Servants Act Bipartisan WEP Repeal/Replace (Brady-Neal) Replaces arbitrary formula with actual earnings based formula New Retirees after Average reduction 50% less Current Retirees Reduction reduced by 30% Cost-neutral winners and losers Now or never? Different opinions

9 Mandatory Social Security The Center for Retirement Research at Boston College The Brookings Institution AARP American Federation of Teachers

10 Medicare Part B No Social Security Cost-of-Living Adjustment in 2016 Hold harmless provision for most Medicare recipients One in seven will see increases of about 52% Largest increase in Medicare s history $ to $ $ to $ Seventy organization wrote congressional leaders Public Sector HealthCare Roundtable is organizing public sector leader $7.5 to $10 billion cost

11 Federal Tax Reform Retirement tax expenditure Wyden something is out of whack $140 billion federal subsidy, but Public employee Employer Pick-Up Joint Committee on Taxation (JCT) 10-year ( ) - $4.8 billion

12 Federal Regulation Public Plans Definition of Normal Retirement Age Definition of Governmental Plan Retirement Security DOL Fiduciary Rule State-based Retirement Options (Secure Choice)

13 Your Critical Role Maintain the trust and confidence of your members and their employers Be proactive don t wait until the battle is on your doorstep Education is key establish the facts Define the real problem retirement security Respond when necessary

14 Questions Tom Lussier The Lussier Group Post Office Box Alexandria, VA T C tlussier@lgva.net