At the suggestion of the Government Finance Officers Association, several national organizations came together in early 2012 to form a "pension funding task force" in Washington, DC. The goal of the task force is to issue guidelines for the prudent funding of state and local government retirement plans. (1) Task force members concluded that the new standards issued by the Governmental Accounting Standards Board, which eliminate both the requirement that governments provide an annual required contribution and the parameters within which an employer's ARC must be calculated, created a pressing need for widely recognized, standardized guidelines concerning what constitutes a sound funding plan for state and local government employers. (See the 'Accounting Angle" article in this issue of Government Finance Review for more information.)
The need for clear funding guidelines is magnified by the continued call by some in Congress for federal oversight of state and local government pension funding and design decisions. The creation of funding guidelines from within the state and local community, in combination with the unprecedented number of changes that have been made by state and local legislators to their pension plans in the past few years, sends a clear message to Congress that states and local governments can successfully regulate themselves and that federal intervention in the pension arena is both unnecessary and unwarranted.
PROPOSED FUNDING GUIDELINES
The fact that state and local governments are proactive in their efforts to strengthen pension funding is particularly important in the fight to prevent federal government intervention in this area. To that end, the pension funding task force has made significant progress in developing a comprehensive set of guidelines to help states and localities ensure the sustainable, long-term funding of their pension benefits.
In late October 2012, the GFOA Executive Board approved a resolution supporting the objectives established by the task force for funding a pension plan. (2) With implementation of the new GASB standards around the corner, the GFOA Executive Board recommended that the GFOA's Committee on Retirement and Benefits Administration prepare a best practice for GFOA members, as well as the wider state and local government pension and finance community, that provides specific details regarding how states and local governments would apply the pension funding policy to best achieve the broader general policy objectives.
Measures to encourage federal regulation of state and local government pension plans, or to impose mandates upon them, continue to circulate on Capitol Hill despite the best efforts of the state and local government community to adopt pension funding guidelines that will help governments work through their own legislative and regulatory structures to ensure the sustainability of their pension plans. One such proposal, which was initially introduced in Congress nearly two years ago, is The Public Employee Pension Transparency Act. PEPTA would mandate a costly and complex layer of federal reporting for states and localities, on top of existing accounting and reporting structures. …