Apparently the Connecticut retirement system for public employees is in trouble and a couple of think-tanks have some suggestions. They should both be ignored.
The Center for Retirement Research at Boston College released a report this month on Connecticut’s State Employees Retirement System (SERS) and Teachers’ Retirement System (TRS) that suggested giving the state more time by:
- separately financing – over a long time horizon – the liabilities associated with members hired prior to pre-funding,
- shifting to level dollar amortization of unfunded liabilities,
- replacing the 2032 full funding date with a reasonable rolling amortization period, and
- lowering the long-term assumed investment return.
- separately financing the liabilities associated with members hired prior to pre-funding over ALL future generations (ie. infinity),
- shifting to level dollar amortization of unfunded liabilities but phased in over 30 years,
- replacing the 2032 full funding date with a reasonable rolling amortization period (with politicians defining the level of reasonableness in an inverse proportion to level of contributions required immediately, and
- lowering the long-term assumed investment return from 8% to 7.95%.
- The state Treasurer must adopt accounting practices that accurately represent the magnitude of Connecticut’s public pension liabilities. Specifically, the Treasurer should reduce its discount rate on future pension liabilities from the current rates of over 8% to 4-5%, a rate range typically used in the private sector.
- Temporarily freeze and permanently reduce Cost of Living Adjustments (COLAs).
- Increase employee contributions.
- Eliminate loopholes in the state’s pension benefit formula that allow public employees to artificially boost their benefits in the last years of employment and lower the pension benefits multiplier for as yet unvested benefits.