PUBLIC EMPLOYEE PENSION TRANSPARENCY ACT
The IAFF opposes the Public Employee Pension Transparency Act.
Pensions for state and municipal employees have traditionally been governed at the state and local level, free from federal government interference. The Public Employee Pension Transparency Act (H.R. 1628/S. 779) would impose unprecedented federal requirements on these institutions, and undermine the retirement security of fire fighters and other public sector employees.
The legislation would require state and local governments to issue misleading reports about the health of their pension plans in an apparent effort to make such plans appear to be underfunded. States and localities that decline to issue such reports would lose their ability to issue tax-exempt bonds. The bill also bars federal bailouts of pension funds, even though no pension funds have sought a bailout.
Contrary to the bill’s stated intent, the transparency requirements would actually create confusion about the stability of pension plans. For the first time, the federal government would force states and local governments to list pension fund liabilities based on “risk free” rates, which is equivalent to the interest earned on Federal Treasury bonds. The risk free rate is far below conservative actuarial forecasts and below what pension funds have historically earned. By forcing public pension funds to use the lower Treasury bond rate, the overall pension liability will appear drastically larger than it actually is. This will cause unnecessary alarm, and frighten legislators into making unnecessary cuts or worse, disbanding pensions altogether in favor of more costly and less secure 401(k)-style defined contribution plans.
The truth is that the alleged public pension crisis is overblown. State and local governments responded to the challenges posed by the Great Recession by instituting a number of reforms. Since 2010, fund balances have been steadily recovering and the overwhelming majority of public pensions are now on sound financial footing. Moreover, there is no need for additional reporting requirements as PEPTA sponsors claim. States and localities already require full transparency, and adding a duplicative layer of federal reporting will impose additional burdens on pension plans without providing any helpful information to plan participants or taxpayers.
1628, the Public Employee Pension Transparency Act
S. 779, the Public Employee Pension Transparency Act
The Public Employee Pension Transparency Act would require states to calculate
On April 18, 2013, H.R. 1628 was introduced in the U.S. House of Representatives and referred to the House Committee on Ways and Means.
On April 23, 2013, S. 779 was introduced in the U.S. Senate and referred to the Committee on Finance.