BEST PRACTICES: Sustainable Pension Benefit Tiers Flashcards
Jurisdictions considering new benefit tiers should examine the following issues: A governments authority to revise its pension benefits, the overall goals it wants to accomplish by doing so, and the effect of such changes on the workforce; and the financial impacts resulting from changes to pension plan design, as well as the effects on employees.
What should jurisdictions examine when considering new pension benefit tiers?
Government’s authority to revise benefits, overall goals, effects on the workforce, and financial impacts.
Why might governments limit existing pension benefits to current employees and create new tiers for new employees?
To manage future costs and ensure sustainability amid fiscal stress and unfunded liabilities.
What role do actuaries play in the design and implementation of new pension benefit tiers?
They help forecast benefit costs, determine funding adequacy, and decide on contribution rates.
Before changing pension benefits, what legal aspects should be considered?
Federal and state legal impediments, constitutional restrictions, statutory provisions, case law, collective bargaining laws, and local ordinances.
How should governments identify financial sustainability goals for pension plans?
By identifying factors affecting sustainability and establishing a pension benefit cost goal for the overall plan and each benefit tier.
What should be considered when reviewing total compensation and the impact of pension benefit tiers?
Comparison to market rates, support for workforce management objectives, equitable treatment, employee morale, and recruitment and retention ability.
What are some alternative pension plan design options governments may explore?
Hybrid plans that include a mix of defined benefit and defined contribution features.
Why might a government reconsider Other Postemployment Benefits (OPEB) when establishing new pension tiers?
To ensure retiree medical benefits are sustainable and competitive, potentially controlling costs and increasing long-term sustainability.
How should retirement ages and pension formula multipliers be adjusted in new benefit tiers?
Consider recalibrating retirement ages and establishing multipliers that reflect income replacement goals, taking into account Social Security and other factors.
What considerations should be made regarding employee contributions in new pension tiers?
Establishing or adjusting contribution rates to ensure equity between existing and new employees and support financial sustainability.
