2017 Pension Reform Legislation under Trump’s Administration

Posted on 01-30-2017 by
Tags: legislative monitoring , pension reform , legislative trends , State Net

The Trump administration, the Republican Congress and several states have made pension reform a top legislative priority in 2017. The slated reforms would affect both public and private sector pensions. Pension reform legislation aims to solve two looming problems: Serious funding gaps facing public sector pension systems and a shortfall in retirement savings for private sector employees.

“Legislative Preview: An Early Look at Opportunities & Risks for 2017,” provides opinion and insight on pension reform proposals from a panel of state and federal pension and benefits law experts. Produced by LexisNexis® State Net®, a leader in legislative and regulatory tracking and analysis, this webinar is complimentary to receive with a simple sign-up.

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The Acute Need to Reform Public Sector Pensions

California, Illinois and several other states and local jurisdictions face large and growing unfunded pension liabilities. The liabilities threaten to wreck budgets or require reduction of other operations and funding. These governments are moving on several fronts to shore up pension systems with measures like:

  • placing new state workers into defined contribution plans (e.g., 2017 IA S 45) instead of defined benefit plans
  • increasing the contribution rates of workers to defined benefit plans
  • raising the retirement age and basing pensions on final five instead of three years of service
  • capping “pension spiking” or salary increase in final years of employment (e.g., 2017 KY BR 348)
  • curtailing “social awareness” disinvestment in certain industries (e.g., tobacco) or countries (e.g., 2017 NY A 905 (Sudan))
  • reducing investment through underperforming, high-fee hedge funds

The time to act is now for many states. Illinois and New Jersey have seen their bond ratings suffer due in part to these unfunded pension liabilities. And returns to pension funds continue to underperform the (sometimes very aggressive) assumptions on which funding is based.

Many state legislatures already have started their new sessions. State Net enables precise legislative and regulatory tracking. Follow state legislative calendars with a clear and concise chart that includes session dates, estimated bill volumes and more.

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Trump, Republicans Make Federal Pension Reform a Budget Priority

Republicans have issued an ambitious plan to trim trillions from federal spending over the next decade. They are looking to the federal pension system for some of that reduction. Plans mirror state proposals in some ways, including:

  • Basing a retiree’s pension benefit on the highest five years of earnings, up from three
  • Requiring that all current federal employees enrolled in FERS increase their contributions to the plan

States, Feds Eye Retirement Crisis in Push to Reform Private Sector Pensions

Surveys show that most Americans have not saved adequately for retirement. States and the federal government hope to increase participation and savings in retirement plans. California has taken the lead in one approach to increasing retirement savings. Workers who lack any employer-sponsored retirement plan will automatically contribute three percent of wages to The California Secure Choice Retirement Savings Trust, to be invested on their behalf by the state. Connecticut, Illinois, Maryland, and Oregon have similar plans taking effect in 2017 and 2018. Massachusetts offers something like this for non-profits and New Jersey and Washington have set up state-run online marketplaces to offer low-cost retirement savings plans to small businesses.

“Legislative Preview: An Early Look at Opportunities & Risks for 2017,” offers a timely look at important legislative and regulatory proposals for pension reform. Get it today.

Download the full webinar recording free

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