WASHINGTON, D.C. – The Secure Annuities for Employee (SAFE) Retirement Act, legislation to strengthen and reform the public and private pension benefit system, was recognized Tuesday by the Urban Institute as a top proposal to effectively address the nation’s public pension debt crisis. Authored by Finance Committee ranking member Orrin Hatch, the measure (S. 1270) received “straight A” grades on seven separate criteria under the Institute’s new, innovative grading model, which was developed to analyze public pension plans. To date, the Hatch pension plan is the only one in the country to have received straight A’s across the board.
Hatch said at an event on Capitol Hill Wednesday:
It (S.1270) is meant to offer an alternative path to employers who want to continue delivering lifetime retirement income for their workers in a world where that is becoming increasingly difficult. Congress can, and in my opinion should, enact policies that will help cities and towns help themselves address the fiscal challenges posed by defined-benefit pension plans. The SAFE Retirement Act is just such a policy.
Dangerously high unfunded pension liabilities of state and local governments have threatened the fiscal solvency of states and municipalities as well as the nation’s long-term fiscal health, including the U.S. credit rating.
The Urban Institute’s Program on Retirement Policy has extensively examined financial risks of the public pension debt crisis and its negative impact on the economy, as well as the ability of traditional plans to effectively deliver pensions to workers. Most recently, the organization created a grading system for proposals that seek to address the issue. Specifically, they grade public pension plans on seven distinct criteria:
- Rewarding younger workers
- Promoting a dynamic workforce
- Encouraging work at older ages
- Retirement income for short-term employees
- Retirement income for long-term employees
- Making required contributions
- Funding ratio
The SAFE Retirement Act, which would streamline current pension programs by providing states, employers and American workers with stronger tools for providing pensions and to better secure retirement savings, received an A in every category.
To view a summary of the SAFE Retirement Act, click here.
To learn more about the Urban Institute’s pension grading methodology, click here.
Below are Hatch’s full remarks delivered in the U.S. Capitol Wednesday:
The topic today is very important. And the presentation will be both practical and newsworthy.
It will be practical because the panel will not only discuss the problems that defined-benefit pension plans pose for state and local governments and their workers, but it will also discuss reform possibilities. I am pleased to participate in any event or effort seeking potential solutions.
I know some are cynical about the ability of Congress to solve problems, and that’s understandable.
Congress has not worked as well as any of us would like lately. But I am still an optimist.
After all, during my time in the Senate I’ve sponsored or co-sponsored over 700 bills that have become law. When I introduce legislation, I’m serious about enacting that legislation into law.
That brings me to a bill I have recently introduced.
One year ago, I introduced S. 1270, the Secure Annuities for Employee (or SAFE) Retirement Act of 2013. The SAFE Retirement Act is designed to help governments deal with the critically important issue of public pensions.
Some have called my bill a “solution in search of a problem.” Yet, nothing could be further from the truth.
The problems are real.
Workers and retirees face problems as fewer and fewer employers are willing or able to sponsor retirement plans that provide lifetime income.
And, of course, more and more state and local governments face problems as mounting pension costs consume ever larger portions of their budgets. There is also the stress placed on taxpayers who have to pay for it all.
Today’s panel will discuss an impressive mechanism the Urban Institute has developed to grade public pension plans.
Funding is a factor, of course, but not the only factor.
The Urban Institute measures seven separate criteria that address, for example, how well public pension plans are doing when it comes to delivering meaningful pensions to workers, whether they are short-term or long-term workers.
It also measures whether a plan discourages work among older workers.
In short, the Urban Institute has developed a method of measuring how well pension plans are performing for the modern workforce.
It is a great service and very useful set of tools that the Urban Institute has provided for policy-makers and legislators. I expect it to be very helpful for years to come.
And that leads me to the newsworthy point I mentioned earlier. I recently asked the Urban Institute to grade the pension reform proposal in the SAFE Retirement Act. I am pleased to say that the annuity-based plan design I have proposed received an “A” grade.
I have to say that it’s been a long time since I received a report card. But I’ll take this one.
The plan received straight A’s on all seven criteria in the Urban Institute grading model.
Let me end by reiterating that my bill is not a solution in search of a problem, and it is certainly not meant to be an attack on anyone or anything. It is meant to offer an alternative path to employers who want to continue delivering lifetime retirement income for their workers in a world where that is becoming increasingly difficult.
Congress can, and in my opinion should, enact policies that will help cities and towns help themselves address the fiscal challenges posed by defined-benefit pension plans. The SAFE Retirement Act is just such a policy.
In a SAFE Retirement Plan, future employer pension costs can be stable and affordable. And employees can receive secure annuity contracts for lifetime pensions that are fully portable, 100 percent vested, and can never be underfunded. And, from a federal taxpayer perspective, the SAFE Retirement Plan provides a tool for municipalities to use that will eliminate risks of future calls for federal bailouts of failed municipal plans.
And one more thing: a SAFE Retirement Plan pension is not subject to reduction by a federal bankruptcy court. Given what has happened in places like Detroit and Rhode Island, that fact alone should mean that my legislation deserves serious consideration from policymakers across the spectrum.
Thank you all, once again, for attending this event.
And, thanks again to the Urban Institute for your solid work analyzing public pension plans and for sponsoring this important program.
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