Edna Love’s 58 years as a nurse for Detroit’s health department earned her a $2,000-a-month pension when she retired in 2011. That pales next to the $1 million she got from a separate city-sponsored savings plan where she put 5 percent of her pay year after year.
Senator Orrin Hatch is pushing an overhaul of public pensions that would let life insurers grab a bigger share of the $3 trillion in state and local funds, a potential windfall for companies such as MetLife Inc. and Prudential Financial Inc.
New York’s chief actuary is recommending that the city’s $115.2 billion pension plans lower their assumed annual rate of return on assets to 7 percent from 8 percent, which would open a funding gap of at least $2 billion next year, according to two people familiar with the proposal.
Pennsylvania, home to a quarter of all U.S. public pensions, has spent at least $2 billion since 1985 to help pay for managing the retirement plans, including thousands that cover no more than 10 municipal workers each.
Pennsylvania Governor Tom Corbett said he wants to move new public employees to a defined- contribution plan and scale back future benefits for current workers to address $41 billion in unfunded pension liabilities.
U.S. state pensions such as Illinois, Kansas and New Jersey are in a “death spiral,” with assets at many insufficient to cover benefits, payouts consuming a growing portion of resources and costs rising twice as fast as investment gains.
Providence was so close to running out of cash a year ago that it couldn’t pay for tires on police cars. This month, Wall Street lined up to lend to Rhode Island’s capital, shrinking its yield penalty 30 percent.
The California State Teachers’ Retirement System, exploring changes in hiring and pay to reduce its dependence on external managers, is looking to one of Canada’s biggest public retirement funds for advice.