The Executive Director's Blog
Welcome to the Director's Page of our website. Here, I will expand on issues that I feel need more attention and address subjects of special interest. Some pertain exclusively to MPERA and the retirement systems we administer; others may focus on national retirement topics.
It is my hope that you find this material interesting and informative.
Roxanne Minnehan
Executive Director
Montana Public Employee Retirement Administration
February 22, 2012
Dear Members,
Yesterday we released the agreed upon information to the Montana Watchdog. To best explain, please read our press release: http://mpera.mt.gov/PressReleases.shtml
Our members’ rights and privacy are very important to us. If you have questions or concerns, please feel free to contact us.
December 30, 2011
Dear Members,
Some of you may have heard about our agreement with the Montana Watchdog to release some of our retiree’s information. Please be assured, although we are required to follow the law, we here at MPERA work diligently to ensure our member’s privacy and respect their rights.
About a year ago the Montana Watchdog requested MPERA release retiree names and pension amounts; however, we did not release this information in an effort to protect the privacy of our members. The Montana Teachers’ Retirement System (TRS) received the same request and asked for an Attorney General opinion on the issue. Recently, Attorney General Bullock released an opinion that the public’s right to know outweighed the individual rights of privacy of state retirees in their retirement benefits.
We have some very strong concerns regarding this decision. By releasing retiree benefit amounts, it can appear that taxpayers pay the entirety of retiree benefits. This is not the case. As you are all aware, public employees contribute to their retirement account throughout their careers both as employees and taxpayers. When they retire, their pensions are paid largely from the investment earnings on those contributions with a portion contributed by taxpayers.
The question seems to be, “how much are taxpayers paying for pension benefits?” Benefit amounts are not a true reflection of taxpayer contributions. Many retirees have purchased service they were eligible for, which increases the years of service used to calculate their benefit. This expense is paid solely by the member. Benefit amounts are also dependent upon the retirement option a member chooses. Monthly and lifetime benefit amounts vary significantly based on this personal, financial choice.
With all of these variables in mind, we have agreed to release to the Montana Watchdog a list of retirees along with their last employer, years of service credit and an estimated amount that their employer(s) contributed throughout their career early in 2012. We hope our members understand that we feel this was the most reasonable compromise we could make in consideration of the Attorney General’s decision.
September 20, 2011
Dear Members,
For those of you who are considering early retirement, I’d like to point you toward our online Benefit Estimator. Our online estimator has been updated to reflect the Early Retirement Factor changes that are currently in effect for PERS members and will be in effect February 1, 2012 for our SRS and HPORS members.
Our online estimator is easy to use. Simply go to our website at mpera.mt.gov, click on Calculate my retirement benefit found in the Nearing Retirement pod then enter the necessary information. For assistance, please remember we are here to help. You can contact MPERA at 1-877-275-7372 (444-3154 in Helena) or email us at mpera.mt.gov.
September 14, 2011
Dear Members,
I am excited to announce that on October 1, 2011 T Rowe Price family of Target-Date Funds will be added to the investment options in our 401(a) Defined Contribution and 457(b) Deferred Compensation Plans.
Some of you may be asking, “What are target-date funds?” Target Date funds are designed to provide a simple investment solution for participants. They automatically adjust your asset allocation of stocks, bonds and cash over time from more aggressive to more conservative to meet your changing needs up to and through retirement. You choose a target-date based upon your anticipated retirement date. For example, if you are planning on retiring in 2030, you would choose a 2030 target-date fund. When you enter the fund, your contributions are invested more aggressively; however, as it gets closer to 2030, your investments are automatically moved to more conservative investment options. Target Date funds are professionally managed.
It is our hope that the addition of the target date funds will simplify the decision making process when trying to create a diversified investment portfolio while maintaining a balanced asset allocation.
Start checking our website later in September as more information becomes available on the funds!
September 12, 2011
Dear Members,
It is never too soon – or too late – to start saving for your retirement. While traditional pensions and Social Security benefits provide a safety net in retirement, they often are not enough. This is especially true in light of what experts say you’ll need to maintain your standard of living after you stop working.
The amount may surprise you. With health care costs rising and life spans increasing, you may need as much as 80-100 percent of your pre-retirement income to maintain your current standard of living.
Because your retirement security matters to us, we’re pleased to announce our participation in National Save for Retirement Week. National Save for Retirement Week is the first Congressionally-endorsed national event dedicated to promoting retirement saving and encouraging employees to save in their employer-sponsored plans.
We’ve planned special events and educational opportunities designed to help you better understand your retirement health. Our goal is to make you aware of how critical it is to save now for your retirement security later.
You’ll learn the answers to important questions like these?
- How do I want to live when I retire?
- Am I saving enough to reach my goals?
- Is my money properly allocated to reflect my age and risk tolerance, two keys to making a retirement plan work?
We hope that you’ll join us for several activities during the week. For more information about our planned events, visit our website at mpera.mt.gov.
If you have questions about your retirement benefits, please contact us at 1-877-275-7372 or 444-3154 in Helena. We look forward to seeing you.
Sincerely,
Roxanne
September 9, 2011
For Members of the Sheriff’s and Highway Patrol Officers’ Retirement Systems
Legislative changes to the Early Retirement Reduction Factors (ERF) in the Public Employees’ Retirement System prompted a review of the ERFs used in all MPERA-administered retirement systems. As a result of this review we discovered the need to update the ERFs in the Sheriffs’ (SRS) and Highway Patrol Officers’ (HPORS) Retirement Systems. MPERA will be adopting new Early Retirement Reduction Factors (ERF) for SRS and HPORS through the Montana Administrative rule process with a proposed effective date of February 1, 2012.
We’ve had several questions about how this will affect our members. Early retirement reductions apply to member as follows:
- SRS – If you are at least 50 years old and have at least 5 years, but less than 20 years of membership service.
- HPORS – If you have at least 5 years, but less than 20 years of membership service.
We anticipate that the new factors will reduce early retirement benefits by approximately 12% over the current factor reductions due to the increased life expectancy of SRS and HPORS members. However, if you are at least 60 years of age or have a minimum of 20 years of membership service, you are eligible for a service retirement benefit and the changes to the factors will not affect you.
If you are considering early retirement and want to retire under the current actuarial factors, you will need to:
- Retire no later than December 31, 2011.
- Receive your first retirement payment in January 2012.
Benefits for anyone terminating employment in January, 2012 or after will be calculated using the updated factors.
Some people have asked if they are considering early retirement, should they retire before the change takes affect? Everyone’s situation is different and we cannot determine if the reduction in benefit caused by the new factors outweighs the increase in service credit a member may earn. Please consider your options carefully and feel free to call MPERA with any retirement questions.
July 22, 2011
Hi Everyone,
July is the month we traditionally mail every active member their annual membership statement. Printing over thirty thousand statements has begun for all retirement systems. The statements will be mailed out over the next several days and we anticipate that all statements will be mailed not later than August 1st.
This year’s statement has a new look and feel. Your statement will come in a windowed envelope. Please be looking for it in your mailbox. Do not throw your statement away!
Your statement will be printed on the front and back of a single letter-sized sheet of paper. The letter on the front of your statement explains the information presented on the back. Please read it carefully. If you disagree with any of your information, please make a copy of your statement and note the item(s) you feel is incorrect. Mail the copy with your notes to MPERA for review.
Click here to see a sample of the new statement.
July 14, 2011
Dear Members,
Some of our members have contacted us with concerns about phone calls they have received asking them to schedule a time to meet to discuss their retirement. These calls are not associated with MPERA.
However, we've learned that some members of Montana Public Employees Association (MPEA) have recently filled out beneficiary cards for benefits through American Income Life Insurance. As a result, American Income Life Insurance is contacting those people to schedule appointments. If you receive a phone call and have concerns, please contact MPEA at: 442-4600 or 1-800-221-3468.
Remember, it is never a good idea to give out any personal information to an unknown source. When in doubt, check it out.
July 1, 2011
Hi Everyone,
Just a quick reminder that legislative changes will be taking affect shortly.
New PERS Members
For people hired on or after July 1, 2011 you will see the following changes:
- Employee contributions to PERS will be 7.9% of your gross salary.
- Eligibility for early retirement is age 55 with a minimum of 5 years of membership service.
- Service retirement age is 65 with 5 years of service.
- The Highest Average Compensation (HAC) used to calculate your retirement benefit will be based on a time period of 60 months.
- The multiplier used to calculate your retirement benefit will be:
- 1.5% per year if your service is less than 10 years,
- 1.785% per year if your service is greater than or equal to 10 years but less than 30 years, and
- 2% per year if your service is greater than or equal to 30 years.
All PERS Members
For all PERS members choosing early retirement, the early retirement factors used to calculate your early retirement benefit will change on October 1, 2011. We’ve had several questions about how this will affect our members. Early retirement reductions apply to any member under the age of 60 with less than 30 years of service credit. Early retirement reduction factors have always been used in the calculation of benefits for people choosing to retire early. These updated actuarial factors take into consideration that people are living longer. Members retiring under a full service retirement will not see a change.
Some people have asked if they are considering early retirement, should they retire before the change takes affect? Everyone’s situation is different and we cannot determine if the reduction in benefit caused by the new factors outweighs the increase in service credit a member may earn. If you are considering early retirement and want to retire under the current actuarial factors, you will need to terminate your employment in August and receive your first retirement check in September. Benefits for anyone terminating employment in September or after will be calculated using the updated factors.
If you are considering returning to work in a PERS covered position after retirement, please be aware that effective July 1st you will need to have a 90 day break in service and have received your first retirement check before you can return to work.
Also effective July 1, 2011, if you are a working retiree who returns to work for one employer in two positions, with one position subject to PERS and the other covered by a different state retirement plan, the hours worked in both positions will count toward your working retiree limit.
Remember: under Montana law, you may not have a written or verbal agreement with your employer to return to work after retirement.
There are several other changes taking affect. Please visit our website and read our most recent Directions for Members, Retirees and Employers to see all of the legislative changes.
Have a happy and safe 4th of July weekend!
Roxanne
June 26, 2011
Dear Members,
We recently sent out our Directions newsletter with information about the changes in legislation. Unfortunately, we inadvertently omitted acknowledging two of the bill sponsors. HB 119 was carried by Representative Gordon R. Hendrick and SB 223 was carried by Senator Ryan Zinke. We sincerely apologize for this oversight. We greatly appreciate the work our legislators do on behalf of our members.
April 11, 2011
Dear Members,
Some of you may have read an article in the newspaper recently providing an update on several bills affecting the pension systems administered by MPERA. Unfortunately, there were some errors in the article pertaining to HB 122, HB 134 and HB 135. Each of these bills was amended to remove any increase in employer contributions. HB 122 was further amended so that employee contributions would increase by only 1% beginning on July 1, 2011, rather than the 2% over the biennium as originally drafted.
The following paragraphs contain a corrected summary of these bills:
House Bill 122, by Rep. Sue Malek, D-Missoula, as amended makes benefit and funding changes to the Public Employees Retirement System for newly hired employees. They include increasing the time to 60 months from the current 36 months to determine the highest average monthly compensation used to calculate retirement benefits. It also increases the normal retirement to age 65 from age 60 for new hires and raises the age of eligibility for early retirement for new hires to age 55 from age 50, with five years of membership service. It would increase employees' contributions' for new hires to 7.9 percent on July 1, 2011 from the current 6.9 percent. Status: Before House, which must act on Senate amendments.
House Bill 134, by Rep. Carolyn Squires, D-Missoula, would revise benefits and funding for the Game Wardens' and Peace Officers' Retirement System. It would increase the time period for determining highest average monthly compensation for new hires to 60 months from the current 36 months. Status: Signed into law by governor.
House Bill 135, by Squires, would revise pensions and benefits for the Sheriffs' Retirement System. It would increase the period for determining highest average monthly compensation for new hires to 60 months from the current 36 months. Status: Signed into law by governor.
March 25, 2011
Throughout this legislative session we have been providing testimony on several bills that have a strong impact to our members and the taxpayers of Montana. One of our top concerns is SB 328 that would close the current Public Employees' Retirement System Defined Benefit Retirement Plan (DB) and require all PERS new hires to be in the Defined Contribution Retirement Plan (DC).
Advocates of this legislation believe this bill is necessary to relieve Montana’s taxpayers of the responsibility of funding the DB plan. They have suggested that by switching to a DC only plan, the taxpayers will no longer bear the burden to ensure funding in the DB plan. That is simply not the case.
Closing the DB plan to new hires is the worst alternative for addressing the current funding issues. DB plan members share in the cost and benefit of the plan. If there are no new members contributing to the plan, the unfunded actuarial liability (UAL) will begin to increase immediately. The payroll base will decline leaving fewer funds available to pay down the UAL and the impacts will be significant:
| TODAY | 2031 | |
| Payroll decreases | $1.15 billion | $0.31 billion |
| Funding status plummets | 74% | 7% |
| Actuarial Accrued Liability increases | $5.24 billion | $8.65 billion |
| Annual required contributions increases | 22.3% | 223.5% |
The state will continue to be responsible for the payment of benefits for many years to come. With the removal of employer and employee contributions into the DB plan, the sole burden of funding falls on Montana taxpayers. Currently, the DB plan has an unfunded liability of $1.35 billion; however, by closing the plan to new participants, the unfunded liability will skyrocket to $8.80 billion by 2031. Each year, funding for the DB plan will decrease creating a deficit that will need to be addressed. (see chart below)
Between legislative sessions, the State Administration and Veterans' Affairs (SAVA) Committee was charged with examining and recommending changes to the Public Employees' Retirement System (PERS). The SAVA committee did not conclude that switching to an all DC plan was a solution. In fact, SAVA did not make any recommended changes to PERS for this legislative session, but recommended the Public Employees' Retirement Board's (PERB) proposal for funding, HB 122.
Unfortunately, SB 328 was introduced without conducting thorough research into the effects that this change would have and we believe there are significant consequences that have not been considered. The change to an all DC plan has been tried in several other states and failed. Nebraska and West Virginia have tried switching and after this costly failure, they have recently switched back to a Defined Benefit Plan.
Some people argue that the DB plan leaves taxpayers holding the bill for paying retiree benefits and that the plan will need to be closed eventually. This is an emotional reaction to market fluctuations that everyone who has an investment experienced over the last couple of years. As markets are recovering, we hope to encourage everyone not to make hasty decisions. In the DB plan, employees and employers make contributions and those contributions are placed in a pooled fund to grow investment earnings. Over 70% of the benefits paid come from the investment earnings.
The Public Employees Retirement Board agrees one size does not fit all. The PERS plan offers both the Defined Benefit Retirement Plan and a Defined Contribution Retirement Plan. The defined contribution retirement plan is an attractive plan for young employees who have time to grow their retirement.
SB 328 passed out of the Senate on a 26 - 24 vote on March 25th. It will be heard by House State Administration on Wednesday, March 30th at 8:00 a.m. Please consider contacting your representative regarding the negative impacts of this bill on the current Defined Benefit Retirement Plan.
February 14, 2011
MPERA's Opposition to HB 197
We at MPERA are watching with great concern the progress of HB 197, the Constitutional initiative proposing to submit to Montana voters an amendment to Article II, section 31, of the Montana Constitution.
That section of the Constitution prohibits the legislature from passing any law that impairs a current contract. Members of MPERA's retirement plans have a contract with the state guaranteeing their retirement benefit. The proposed amendment would allow the legislature to impair, or change for the worse, that contract right. Specifically, it would "allow the legislature to modify a public retirement plan and the public retirement plan contracts, as they apply to individuals who are already members of the plan, in order to maintain the actuarial soundness of the plan."
This bill is troubling for members of retirement systems administered by MPERA for several reasons. First and foremost, this bill would affect current employees who may see their benefits change just as they are nearing retirement and retirees who are currently relying on their benefit payment, including their annual guaranteed benefit adjustments.
Second, the United States Constitution also prohibits state legislatures from passing any law that impairs the obligation of contracts. Any attempt to change the terms of the contract in the Montana Constitution would be overruled by the United States Constitution. In the end, it is likely that many law suits would arise if, in fact, a Constitutional Amendment were to pass.
Finally, addressing funding issues through a Constitutional amendment is extreme and opens the door for other potential harmful changes to our Constitution.
Not Like Past Legislation
Over the years changes have been made by the legislature regarding the retirement systems. Unless offset by a positive benefit, these changes were only applied to new employees hired after the effective date because the legislature recognized the contract right of current members established by the Montana Constitution. HB 197 proposes to change the contract right of members, thereby enabling the legislature to change retirement benefits for all public employees and retirees. Public employees would no longer be able to rely on the promised benefits under which they were hired.
Need for Members to Speak Out
We've heard from some of our members that they are not concerned about HB 197 because passing a Constitutional amendment is very difficult. But I urge you not to be passive when it comes to legislation that can affect your retirement benefits. Indeed, for the amendment to pass, it needs to be brought before the general voter.
According to the Secretary of State, since 1972 Montana citizens have voted on 57 Constitutional amendments; 31 (54%) passed and 26 (46%) failed. With retirement benefits under constant attack in the national press, the general public could be led to believe changing public employee retirement benefits for the purposes of maintaining the actuarial soundness of the systems is a reasonable act. Unfortunately, the impact may be that a long-term employee or a retiree who has depended upon that income can suddenly find their benefit significantly reduced.
Other Options
While MPERA does not endorse reducing current members' retirement rights, we recognize that the legislature will be taking action to return our systems to actuarial soundness. The intent of HB 197 is to make our retirement systems actuarially sound by opening the door to changes to current member's contract rights. This avenue will be tested in our courts. Alternatively, the legislature could propose statutory changes that impact our current members. Of course these amendments could also be subject to court challenges. But at the end of the day, the legislature would know, without impacting our great Constitution, whether it can reduce current members' retirement contract rights in order to remedy funding issues facing our retirement plans.
MPERA is wholeheartedly opposing this legislation. We ask that you consider speaking out to your legislators regarding this bill. The impact could affect many of Montana's current and former public employees.
The House State Administration Committee will be voting on this bill Wednesday, February 16th. Members of the committee and their contact information can be found at the Montana State Administration Committee web page. Scroll to the bottom of the page for the list of committee members.
January 17, 2011
HOUSE BILL 122 NEEDS YOUR SUPPORT
- Increases the retirement age from 60 to 65
- Changes the highest average compensation calculation from 3 to 5 years.
- Creates a phased in the multiplier rewarding career employees.
- Increases employee contributions by 1% per year each year of the biennium.
December 17, 2010
RESPONSE TO HEADLINES A recent article appearing in Montana newspapers describes pension funds as "beleaguered." This is a surprisingly accurate description because a synonym of beleaguered is "besieged." Pension funds are truly being besieged by both government and private sectors. Many feel that public employees do not deserve their pensions even though in Montana, public employees have contributed part of every paycheck as a condition of their employment. There has been talk of "lavish" benefits being paid to public employees and "gouging" the pension system. With headlines like this news article, it stands to reason that many taxpayers would be alarmed. However; rest assured, the article is misleading. A quote from the legislative audit report says "For individual members, benefit inflation can represent a significant financial advantage, though our analysis indicates that practice is limited and would not likely affect the actuarial soundness of the retirement systems as a whole." We are encouraged to hear (exactly what we expected to hear) that although benefit inflation can and does occur, it is a relatively rare practice and is unlikely to impact the solvency of the retirement systems. Benefit inflation is often referred to as salary spiking. What is salary spiking? Salary spiking is defined as improperly increasing salary before an individual retires. This can increase a person's retirement benefit because benefits are calculated using an employee's highest average compensation. It is important to recognize that many employees advance throughout their careers. This is not considered spiking. Spiking is when the highest average calculation period is purposefully and abnormally increased for the purposes of the retirement calculation. Some examples are:
- Accumulating significant amounts of overtime
- Accumulating bonuses and other discretionary payments
- Having legislative service prior to full-time public service
- Receiving compensation from double employment
- Receiving other significant, late-career compensation increases
November 22, 2010
With the upcoming legislative session, many members have expressed concerns about the impact to retirement benefits. The security of the retirement trust funds is important to the Board and MPERA staff. We have been working to provide recommendations to the legislature to meet this goal.
Actuarial valuations as of June 30, 2010 show that three of the eight defined benefit retirement plans are not fully funded - PERS, GWPORS and SRS. As fiduciaries, we have a responsibility to inform the legislature. This responsibility requires us to make some hard decisions to find the best way to address the funding shortfalls. As we finalize our recommendations, please rest assured, it is always our goal to pursue a course of action in the best interest of our members and beneficiaries.
We are committed to safeguarding your benefit and will vigorously oppose any legislation that would change benefits for current members. We have maintained that it is a contract right and cannot be changed.
Secure retirement benefits are important for all members of society and you are the best ambassadors of the retirement plans. Please consider lending your voice as an advocate on behalf of all current and future retirees to the legislature.
Thank you
November 04, 2010
NATIONAL SAVE FOR RETIREMENT WEEK A SUCCESS!
Hi! From October 18 to the 22, MPERA celebrated National Save for Retirement Week. This was especially exiting because for the first time, we held our retirement classes and guest speaker seminars via webinar. A webinar is a conference held over the Internet and allowing people to log in and attend from all over Montana. With this technology, we are now able to reach people in areas that normally we could feasibly travel to once or twice a year. It was very exciting to see people log in from as far away as Plentywood, Scobey, and Medicine Lake!
Going forward, we plan to continue to hold webinars for anyone who cannot step away from their desk to attend a class. Retirement education is so important for all our members. We are proud to be able to offer education to everyone, regardless of distance.
October 14, 2010
NATIONAL SAVE FOR RETIREMENT WEEK
Hi!Next week we will be celebrating National Save for Retirement Week at MPERA. This is the first time we have observed Save for Retirement week, but it won't be our last! We invite all our members to attend workshops either in Helena, or Havre and Missoula. If you cannot attend in person, we are also presenting them via webinar!
Saving for retirement is so very important, because a retirement pension such as PERS is not designed to be the sole source of a retiree's income. These workshops are designed to teach members about taking advantage of the State's 457 Deferred Compensation Plan and other methods of saving for and supplementing your state retirement benefit. We hope that everyone who can attend will do so. As always, we appreciate your feedback. Please contact us and let us know if this information was helpful and how we can improve.
Thank you