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The House Retiremen= t Ad Hoc Study Committee met as planned on yesterday, Thursday, September 22, 2011.<= span style=3D'mso-spacerun:yes'> Attached you will find my comments= made to the committee on behalf of state employees and retirees. The committee sought possible reco= mmendations which we felt at this time would be premature. Rather, this first presentation wa= s used as an opportunity to formally lay out our expectations of the evaluation process and priority plan components. Those components include maintaining a defined benefit plan, 28 year retirement, and COLAs for retirees.

You will also find = below, the article from today’s edition of the State Newspaper that summarizes the meeting of the House Retire= ment Ad Hoc Study Committee. Follo= wing you will also find an excerpt from an article which ran in USA Today this morning. This article brings to light significant reform opportunities and recommendations to improve the current system and reduce costs.

Please note your ca= lendars and if at all possible, plan to attend the Senate Retirement Subcommittee meeting on next Wednesday, September 28, 2011 at 1:00pm in Room 308 of the = Gressette Building. As additional scheduling informati= on becomes available, we will continue to keep you updated. =

Thank you to those employees and retirees, who made a special effort to attend yesterday’= ;s meeting.

Carlton B. Washington

Carlton Washington

SCSEA Executive Director

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<= span style=3D'font-family:Arial;color:black;letter-spacing:-.7pt;mso-font-kernin= g: 18.0pt'>Comments on behalf of SCSEA to House Retirement Ad Hock Study Commi= ttee 9-22-11:

The South Carolina= State Employees Association was originally organized in 1943 by a small group of = 20 employees. This small group of employees were exceptionally astute and forward thinkers who recognized the need and importance of establishing a system of retirement for all state workers. Through hard work and what I would describe as unprecedented ingenuity, the= ir efforts successfully established the South Carolina Retirement System throu= gh an amendment to the State Constitution in 1945, a remarkable feat for an organization of its size.

Today there = are approximately 530,000 plan participants.

Given the potential ramifications of radical changes or even slight modification to t= he retirement system, the General Assembly appropriately appointed subcommitte= es in both chambers to thoroughly study the current system, research industry trends, and analyze long term costs and associat= ed benefit comparisons to alternative programs.

At this poin= t, there is some indication a proposal will be developed by this committee bef= ore the General Assembly reconvenes in January. It appears a sense of urg= ency has been created through the use of hypotheses and assumptions that present worse case scenarios.

One evaluati= on tool is based on a theory in which every eligible employee were to retire right now, today. In reality, every eligible participant wi= ll not retire today, tomorrow, or even next week, next month, or next year. In fact, this is the exact polar opposite of the premise on which retirement systems and other systems of insurance operate and are based. The premise b= eing that by consolidating the resources of the whole, the risk- in this case retirement - is effectively absorbed and mediated by the group to provide f= or individual retirement pensions.

Another popu= lar misconception is the notion that public pensions are bankrupting the state. First, the average state employee has a retirement benefit of about $22,000 per year. Second, public pensions account for less than 4% of the state’s budgetary expenditures. The fact is, if we do absolutely nothing to modify the current plan, it would take several years before any adverse outcome was realized.

Based on the= most recent actuary report, the current unfunded liability for the state retirem= ent system is 37.6 years. Clearly, this is not where we want to be or sho= uld be in order to keep the system “actuarially sound”. It is important however to keep the problem in perspective. As the overall economy recovers, funding levels will continue to improve as well.

State employ= ees and retirees have certainly shouldered their share of the burden caused by = the recent economic downturn. Over the past ten years, the CPI has increa= sed 27.9%. During this same period, state employees received Cost of Living increases totaling 17%, a difference of nearly 11%. The economic impact is = even more significant given that state employees have not received a COLA since = 2007 nor a merit increase since 2001.

These factor= s when coupled with furloughs (which are essentially salary reductions), potential changes to the state retirement system that could reduce benefits and incre= ase contributions, and the most recent 4.5% increase in employee health insuran= ce, is back breaking for most state employees and retirees.

In compariso= n, the state’s health insurer, Blue Cross Blue Shield of South Carolina, has generated millions of dollars in profits over the past five years. In 2010 alone, the company’s profits rose 46% to about $96 million. Total cap= ital increased from $1.5 billion in 2009 to nearly $1.7 billion in 2010. Even mo= re disturbing is the fact that nine members of the company’s board of directors have more than doubled their reported salaries in the past year. =

This trend h= as held true from a national perspective as well. Corporations have grown wealthier and are stockpiling record amounts of cash. Meanwhile, average household net worth has declined. The ranks of the nation’s poor swel= led to a record 46.2 million which means nearly 1 in 6 Americans now live in poverty.

From this perspective, while the system is in need of management options to reduce the unfunded liability to meet or even exceed acceptable industry standards, it= is not at the point of no return and can be conservatively managed to achieve acceptable investment expectations.

In fact, a r= eport just released by the National Conference on Public Employee Retirement Syst= ems substantiates public pension funds are experiencing robust recovery followi= ng the historic market downturn. The South Carolina Retirement System re= ported returns of 14.6% in FY2010 and an unprecedented return of 18.4% in FY2011. =

As a matter = of practice, plans should occasionally be reviewed to reflect new information, economic conditions, mortality improvements, and changes in patterns of retirement. From the State Employees Association’s perspective there are certain key components that should be maintained. Those components include maintaining a defined benefits plan, protecting economies of scale = for retirees, and 28 year retirement.

Eighty perce= nt of publicly traded, Fortune 500 companies in Texas, including Southwest Airlines, Texas Instruments, Continental Airlines, and ConocoPhilips, have retained defined benefit plans for their employees. The fact remains that traditional defined benefit plans are more cost effective than riskier 401K defined contribution plans which require employees to bec= ome expert financial advisers. Defined benefit plans provide lifetime inc= ome to those who elect to collect their retirement in the form of an annuity.

Protecting <= span class=3DGramE>retirees economies of scale is an important plan compo= nent that should also be retained. Lower or inadequate retirement income means m= ore retirees will be dependent upon taxpayer supported health and welfare progr= ams. Research confirms that poverty among older households lacking pension income was six times greater than those with pension income. If members of our soc= iety are self-sufficient, the need for taxpayer funded public assistance is redu= ced.

The bottom l= ine, administrative changes are needed. Maintaining a defined benefit plan= is critical to our state and national economy. Providing additional measures to balance retiree incomes based on the rate of inflation is also a necessary = plan component. Finally, maintaining 28 year retirement, as part of a benefit pa= cket designed to bridge or at least to some degree lessen the traditional gap in= pay between public and private sector employment, is equally critical to the state’s ability to recruit and retain highly qualified, long-term employees.

To that end,= there are a number of conservative measures that may be further evaluated to redu= ce the unfunded liability and maintain these standards. Maintaining the fundamental attributes of the existing plan is a priority. This goal can be accomplished through the same or perhaps an even more defined sense of ingenuity than was originally required to establish the state’s retirement system that today serves more than a half a million eligible plan participants.

Friday, Sep 23, 2011 =

Posted on Fri, Sep. 23, 2011

S.C. retirees told to expect less

By A= DAM BEAM
abeam@thestate.com

State re= tirees could see their annual cost-of-living increases cut in half and retired pol= ice officers could lose those increases altogether, under a plan discussed by s= tate lawmakers Thursday.

Gabriel = Roeder Smith & Co., an actuarial firm that evaluates pension plans, has recommended the state lower its projected earnings on its pension fund investments to 7.5 percent from 8 percent, “based on current capital market assumptions.”

By law, = that move would reduce and cap at 1 percent automatic annual cost-of-living adjustments for retirees on the S.C. Retirement System. Currently, those retirees can get annual increases of up to 2 percent, depending on inflatio= n.

“C= oupled with the (recent) 4.5 percent increase in health insurance, it’s backbreaking,” said Carl= ton Washington, executive direc= tor of the S.C. State Employees Association.

In 2008, lawmakers agreed to give state retirees an automatic cost-of-living increas= e of up to 2 percent every year, depending on inflation. To pay for those increa= ses, lawmakers hiked the assumed rate of return on the retirement fund’s investments to 8 percent from 7.25 percent.

State la= w says if the state ever lowers that rate of return below 8 percent, state retirees’ automatic cost-of-living increases would be capped at 1 per= cent. Also, cost-of-living increases for retirees on the Police Officers Retireme= nt System would be eliminated, according to Jarrod Bruder, executive director = of the S.C. Law Enforcement Officers Association.

Some law= makers are worried the 8 percent assumption is too high, given the current state of the economy. Robert Borden, the chief investment officer for South Carolina’s retirement syst= ems, said he expects the fund to earn 7.5 percent on average.<= /p>

“T= here is a growing consensus that the (8 percent) rate is too high,” Comptroller General Richard Eckstrom told lawmakers Thursday during a meeti= ng of the House Ways and Means Ad Hoc Retirement Study Committee.

The S.C. Retirement System had 106,230 retirees and beneficiaries as of July 1, 2010; the Police Officers Retirement System had 12,566 retirees and beneficiaries. Another 390,000 people pay into or have paid into the retirement systems but are not yet retired.

Republic= an state Rep. Jim Merrill of Berkeley County, chairman of= study committee, said he did not know if lawmakers would lower the rate of return= but he thinks everyone will “err on the side of caution.”

State em= ployee associations say there is no need to lower the projected investment returns. Roger Smith, executive director of the S.C. Education Association, said the retirement system had an 18.4 percent return during the last fiscal year, a= nd a 14 percent return the year before that.

But the = fiscal year that ended June 30, 2009, was disastrous, and the fund has not fully recovered. The average rate of return over the past five years has been 4 percent, according to the S.C. Retirement System Investment Commission.

Bruder, executive director of the S.C. Law Enforcement Officers Association, said t= he cost-of-living increase is important to his association’s members. “But we don’t want to have them at the detriment of the entire system.”

Earlier = this week, Gov. Nikki Haley said she is considering every option.

“We should look at the rate of return,” Haley said. “We should look= at the TERI program. I think we should look at the years of retirement. All of that should be looked at.”

How state lawmakers pump up pensions in ways you c= an't

By Thomas Frank, = USA TODAY

At age 55, South Carolin= a state Sen. David Thomas began collecting a pension for his legislative service without leaving office.

Most workers must retire from their jobs before getting retirement benefits. But Thomas used a one-sentence law that he and his colleagues passed in 2002 to= let legislators receive a taxpayer-funded pension instead of a salary after ser= ving for 30 years.

Thomas' $32,390 annual retirement benefit — paid for the rest of his life = 212; is more than triple the $10,400 salary he gave up. His pension exceeds the salary because of another perk: Lawmakers voted to count their expenses in = the salary used to calculate their pensions.

No other South Carolina state workers get those perks.Since January 2005, Thomas, a Republican, has made $148,435 more than a legislative salary would have paid, his financial-disclosure records show. At least four other South Carolina lawmakers are getting pensions instead of salaries, netting an extra $292,000 since 2005, records show.

Pension perks aren't unique to legislators in South Carolina. More than 4,100 legislators in 33 states are positioned to benefit f= rom special retirement laws that they and their predecessors have enacted to bo= ost their pensions by up to $100,000 a year, a USA TODAY investigation found= . Even as legislators cut basic state services and slash benefits for police, teac= hers and other workers, they have preserved pension laws that grant themselves p= erks unavailable to voters they serve or workers they direct.<= /p>

In some states, lawmakers add expenses, per diem allowances and stipends to th= eir base salaries. That inflates the compensation that's used to calculate retirement benefits, which are typically a percentage of final pay. In other states, legislators have written a special definition of salary that applies only to their pensions. Additional tactics include:

•Basing pen= sions on salaries legislators are not paid or were paid in non-legislative jobs.

•Collecting= state pensions while also collecting legislative paychecks.

•Retiring e= arlier — at a younger age or after fewer years — than other state work= ers, or with richer benefits.

"It's mind-blowing hypocrisy," says state Rep. Ste= phen Webber, a Democrat from Misso= uri. State lawmakers there meet for roughly five months a year and are paid slig= htly more on average than a state worker, but records show a typical lawmaker's pension averages 30% more than a state worker's. The reason: rules legislat= ors wrote for themselves.

"The whole two-tiered system really encapsulates how we've operated here in Missouri and in = the rest of the country," he says. "Lawmakers treat themselves differently."

The generous systems mean that at least 570 lawmakers in 19 states have qualifi= ed for pensions that will pay them as much as — or in one case 17 times = more than — their base legislative salaries, USA TODAY found.

That represents nearly 10% of the 5,900 lawmakers in the 40 states with legislat= ive pensions. About 450 are lawmakers in Mississippi, Kansas, South Car= olina, Texas and New Mexico, a state wh= ere lawmakers receive no salary but can get a pension with five years of servic= e.

More than 100 other lawmakers have collected about $15million total in state pensions while holding office, USA TODAY found. They serve in states that allow "double dipping" for legislators but bar or restrict other workers from getting state pensions w= hile holding state or municipal jobs. Most of those lawmakers have retired from = jobs such as state police officer or public school teacher, but others are drawi= ng pensions solely for their legislative service.

For South Carolina's Thomas, the choice to trade a legislative salary for a legislative pension = was easy. "You get paid more," he says.

For complete article go to: http://www.usatoday.com/news/nation/story/20= 11-10-11/1A-state-lawmakers-pump-pensions/50522036/1<= /p>