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To better understand the challenges of the 401(k) system and its coverage and to assess possible strategies to improve it, this report presents a three-part analysis. The first part focuses on 401(k)s and documents the extent and nature of portability, the flow of money to IRAs, and leakage from both systems. It summarizes resulting problems and potential solutions. But beyond the existing 401(k) system, a coverage gap remains. So, the second part of the analysis identifies the nature of the coverage gap among wage and salary employees and assesses proposed solutions. But these solutions would not affect the 16 percent of workers in non-standard employment. Therefore, the third part of the analysis looks at options for covering these workers.

The objective of this report is to assess and present a wide – though not comprehensive – range of available options by examining and summarizing existing proposals and, where relevant, examples from other countries.

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This report examines the financial status of the five State-funded retirement systems.

The following is a summary of the findings:
• Public Act 88-0593 requires the State to make contributions to the State retirement systems such that the total assets of the systems will equal 90% of their total actuarial liabilities by Fiscal Year 2045. The contributions are required to be made at a level percent of payroll in Fiscal Years 2011 through 2045, following a phase-in period that began in Fiscal Year 1996.
• From FY 2003 through FY 2017, the combined unfunded liabilities of the systems increased by $86.0 billion based upon the market value of assets. The main factors for this increase in unfunded liabilities were actuarially insufficient employer contributions, changes in actuarial assumptions and demographics and other miscellaneous actuarial factors, along with lower-than-assumed investment returns over 5 years.
• The discussion of the financial condition of the State retirement systems centers on the funded ratio, or net assets divided by accrued liabilities. A system with a 100% funded ratio is fully funded because its assets are sufficient to pay all benefits earned by employees. Based upon the market value of assets, the funded ratio of the State retirement systems combined was 39.8% as of June 30, 2017.
• Projections of the future financial condition of the State retirement systems provide…….

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The brief’s key findings are:

• To improve the funded status of state and local pensions, many plan sponsors have cut benefits, particularly for new hires.
• Such cuts, without offsetting increases in wages, could potentially make government employment less attractive to workers.
• The analysis found that workers joining the public sector after benefit cuts had earned less in the private sector than those hired before the cuts.
• This result suggests that pension cuts may have hurt governments’ ability to compete with the private sector for workers.

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Let’s think about these two words for a moment…”covet” (to yearn to possess or have something) vs. “begrudge” (to envy or resent the good fortune of someone, to be unhappy or upset because someone has something you think they do not deserve).

Most of us growing up and going to church probably believe to covet something is bad (it is a commandment after all). Is it possible though that a little coveting is a good thing? If I want something bad enough, perhaps I’ll work harder to make sure I get it. And this doesn’t just apply to material things—it could be getting in better physical shape, finishing a college degree, etc. But what does that have to do with pensions?

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Are you thinking about claiming your Social Security benefits soon? Before you decide to start taking your benefits, it’s important to determine if you’ve reached your full retirement age. If you haven’t, claiming Social Security now instead of waiting could result in much lower benefits.

How much will your Social Security benefit be reduced if you retire early?

Social Security benefits are calculated based on a formula that factors in your highest 35 years of earnings, adjusted for wage growth. The formula determines what your standard benefit amount is, which is the benefit you receive if you retire at the age the Social Security Administration designated as your full retirement age (FRA).

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Welcome to the latest edition of This Week in Pensions! As we do most weeks, we have gathered the best stories about pensions and retirement security from the previous week. This is the news you need to know in the fight for a secure retirement.

Here are this week’s top stories:

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Below you’ll find resources that dig deep into the numbers to determine how, when and why certain strategies for generating retirement income work, and how effective they are when compared to other strategies.

This collection of retirement income research takes investment portfolios and annuity products, looks at them inside and out, upside and down, and spits out a generous supply of charts, graphs, and tables which tell you exactly how each strategy measures up to the task of generating a life-long inflation adjusted retirement income.

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 By: Jim McNamee, President IPPFA
IPPFA supports legislation aimed at expanding investment authority of local Police and Fire Pension Boards. The current investment rules, just as the market changes, need to be updated. HB 5571 is a bill that was drafted with input from our investment managers and DOI. This bill clarifies language on investment authority. Police and Fire Pension Fund Trustees have proven, when given the tools, they meet or exceed their investment benchmarks. The Anderson Economic study reflects Article 3 and 4 Funds’ exemplary investment performance. Other proposals from the Illinois Municipal League (“IML”), like consolidation, will increase unfunded liabilities due to transition costs and disruption of our retirement systems. The COGFA study shows consolidation is nothing more than a “pie in the sky” claim. The IML’s flimsy plan is not supported by any credible experts and fails under even the most superficial of challenges. Taxpayers will pay more under the IML plan.  “Consolidation” is about who controls Police Officers’ and Firefighters’ retirement money. It is not about solid fiscal policy, ethical reform, or even doing the right thing – it is about power. Police Officers and Firefighters have always been good stewards of their retirement systems.  We should trust them to continue their excellent and scandal free track record.