PUBLIC EMPLOYEE PENSION TRANSPARENCY ACT
• Managing and funding public pensions has historically been the job of state and local governments. PEPTA represents an unprecedented and unwarranted federal intrusion into state and local affairs.
• The so-called public pension crisis is largely a myth. Pension funds have rebounded strongly from the great recession, and the vast majority of plans are now on solid financial footing. In the few jurisdictions where plans are underfunded, states and local governments are working aggressively to address the shortfall. There is no need for federal intervention.
• The requirement to project long-term plan earnings based on the “risk-free” rate of return runs counter to accepted actuarial practices. Currently, professional actuaries make projections of plan earnings based on estimates that examine both past performance and conservative predictions for future growth. PEPTA proposes to replace this sound, professional process with a politically motivated formula.
• Reporting a plan’s funded status using this artificially low rate would provide a misleading picture of the fund’s health and could force policy makers to abandon pension plans that have worked well for generations.
• Defined benefit pension plans provide a secure retirement for public employees. Replacing defined benefit plans with 401(k)-style defined contribution schemes, as the sponsors of PEPTA suggest, would undermine retirement security, and pose huge transition costs on states and localities.
• Defined benefit pension plans also provide for death and disability benefits, which other types of retirement plans do not. Just as Congress recently reaffirmed that military personnel who are injured in the line of duty should receive a secure pension, states and local governments should be able to provide the nation’s domestic defenders with disability benefits. PEPTA would make it much harder for jurisdictions to continue to provide such coverage.
• PEPTA requires states and localities to comply with duplicative reporting requirements. Pension plans already fully report funding projections and other relevant information under state and local laws. Adding an additional federal layer of reporting will impose burdens on plans without increasing transparency.
• Sponsors of PEPTA claim that federal intervention into state and local pension funds is needed to avert a federal bailout of underfunded pension systems. But no pension plan has ever sought a federal bailout, and none plan to do so.