Twenty National Organizations Dispute Portrayal of State & Local Retirement Systems In Letter To Congress

Business Wire, June 18, 2008

WASHINGTON -- A broad coalition of government officials, retirement systems, and unions has sent a letter to Congress saying the use of inappropriate and incomplete information by some organizations distorts the truth regarding public pension finance.

"Our common goal is to set the record straight," said Jeannine Markoe Raymond, director of federal relations for the National Association of State Retirement Administrators (NASRA). She added, "The fact is, state and local government pension systems are collectively financially sound and getting retirement right for Americans. These systems already have set aside some $3 trillion in assets to pay for future benefits, clearly demonstrating that pre-funding a modest and stable retirement income for the nation's workforce is an attainable goal."

"Our own research is affirmed by recent studies conducted by credible, independent sources. More specifically, public sector pension plans have pre-funded nearly 90 percent of their future liabilities for some 20 million Americans," said NASRA research director Keith Brainard. He added, "Moreover, few pay attention to the fact that more than three-fourths of the costs of these benefits is paid from employee contributions and investment earnings, with less than one-fourth of the cost paid by the employer/taxpayer."

Recent studies by the U.S. Government Accountability Office, U.S. Census Bureau and the Center for Retirement Research at Boston College find the vast majority of public sector pension plans are sound and on track to meet their future obligations.

Said Leigh Snell, federal governmental relations representative for the National Council on Teacher Retirement (NCTR), "We understand that good news may not grab the headlines. But misrepresenting the financial health and falsely eroding confidence in these systems do a disservice to taxpayers and workers who police streets, fight fires, educate children, and care for the sick." He added, "As a nation, we should be examining how this cost-efficient system can be emulated to expand retirement security for all American workers."

Signatories on the letter include the National Conference on State Legislatures, the National Association of Counties, the National League of Cities, and the U.S. Conference of Mayors. Employee groups signing the letter represent the nation's teachers, firefighters, police officers, and state, county and municipal workers.

The letter to lawmakers indicates that state and local governments take seriously their responsibility for paying promised benefits to their employees and retirees:

* Comprehensive state and local laws, public accountability, and scrutiny provide rigorous and transparent regulation of public plans resulting in strong funding rules and levels.

* Public pension assets are professionally managed and invested on a long-term basis using sound investment policies.

* On the whole, public pension funding levels and investment performance have been found to meet or exceed those in the private sector.

* Public plan participants' accrued benefits and future accruals are protected by state constitutions, statutes, or case law that prohibits the elimination or diminution of a retirement benefit.

Additionally, the letter explains that important distinctions between the public and private sectors, as well as the structure and governance of their pension plans, are often unrecognized or misunderstood. State and local government employee pensions are designed much like the Federal pensions provided to U.S. military and civil service personnel, and similarly are backed by their sponsoring governments. One important distinction, however, from Federal plans is that State and local pension systems have pre-funded nearly 90 percent of their future benefits. Accordingly, suggesting the application of corporate finance measures --which are aimed at companies that can be acquired or go out of business--is simply inappropriate.

The full text of the letter is available at www.nasra.org.

The National Association of State Retirement Administrators (www.nasra.org) is a non-profit association whose members are the directors of the nation's state, territorial, and largest statewide public retirement systems. Established in 1955, NASRA's 82 members oversee retirement systems that hold more than $2 trillion in assets and that provide pension and other benefits to more than two-thirds of the nation's state and local government employees.

The National Council on Teacher Retirement (www.nctr.org) is dedicated to safeguarding the integrity of public retirement systems in the United States and its territories to which teachers belong and to promote the rights and benefits of the members, present or future, of the systems. NCTR had its beginnings in 1924; became affiliated with the National Education Association in 1937; and became an independent association in 1971. NCTR membership includes 77 state, territorial, local, and university pension systems. These systems serve more than 16 million active and retired teachers, non-teaching personnel, and other public employees, and have combined assets of nearly $2 trillion in their trust funds.