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Draft pension bill released

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* 10:44 pm - Some legislators have received a draft version of the pension reform bill tonight. Click here to read it, but keep in mind that this is only a draft.

…Adding… TRS did an analysis of the proposal which you can read by clicking here. From the analysis…

• The cap on pensionable earnings is indexed at half of CPI. Indexing the pensionable pay cap at half of CPI does make it more likely that at some point in the future that TRS will no longer meet the requirements for FICA tax exemption. Indexing this cap at half of CPI generates savings in the short term. That being said, future policy makers will likely find it necessary to update this cap to full CPI indexation to meet the requirements of FICA tax exemption and to keep pace with reasonable benefits practice. We recommend the use of full indexation.

• The current COLA does a reasonable job of keeping pace with inflation. The current Tier 1 COLA accounts for 25% of the active liability and 22% of the retiree liability. By definition, the proposed COLA will not keep up with inflation. It will remove about 40% of the COLA liability.

• The proposed staggering of the skipped COLA increases is less harmful to members than one continuous period with no increases, but with somewhat less savings to the State.

• Since the proposed skipping of COLA increases applies to actives and not current retirees, there could be a rush for actives to retire; however, proposing only a one year skip for active members currently eligible to retire should mitigate the rush to retire.

posted by Rich Miller
Sunday, Dec 1, 13 @ 10:44 pm

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