Senate Appropriations Committee budget hearing with SERS
Senate Appropriations Committee budget hearing with SERS/PSERS (BH)
3/23/15, 1:00 p.m., 140 Main Capitol
By Kimberly Hess
The committee held a budget hearing with representatives from the State Employees Retirement System (SERS) and Public School Employees Retirement System (PSERS). Representing PSERS were: Melva Vogler, chairman; Terri Sanchez, deputy executive director; and James Grossman, chief investment officer. Representing SERS were: Glenn Becker, chairman; David Durbin, executive director; and Thomas Brier, chief investment officer.
Sen. Eichelberger, chairman of the Finance Committee, asked about the likelihood of the systems each achieving their assume rates of return, 7.5 percent, over the next ten years. Grossman said the likelihood is fifty percent. Durbin agreed, noting that 7.5 percent rate was recently reaffirmed. Sen. Eichelberger called 7.5 percent “optimistic.”
Sen. Eichelberger noted the two systems operate on different fiscal years and asked about the feasibility of aligning them. Sanchez confirmed PSERS’s fiscal year runs from July 1 to June 30 and said this is aligned with the school year, which Vogler pointed out would make it difficult to change. Durbin indicated SERS’s fiscal year is a calendar year and said it would have to be changed in statute. He noted SERS does a lot of its projections on both the calendar year and the state’s fiscal year to aid in analysis. He said there are costs to convert, including the question of what to do with the six month period that would be left hanging. He concluded the question has not been extensively studied.
Sen. Eichelberger noted most retirees have a lump sum withdrawal option and asked if calculations are made based on taking the lump sum and leaving it in. Both systems confirmed they make both calculations. Durbin said SERS paid about $305 million in that option and Sanchez said PSERS’s payments are about $1 billion. Durbin pointed out that Pennsylvania is one of three states that offers the option to withdraw.
Sen. Eichelberger asked how the governor’s proposed pension obligation bond would affect PSERS. Sanchez pointed out PSERS would simply be the receiver of the $3 billion bond, which would have an immediately impact on the system’s $35 billion unfunded liability and as amortized would result in about $8 billion in savings for the system and a 1.5 percent difference in the employer contribution rate during that time. She confirmed PSERS would be held harmless from the problems that could arise from floating a bond and said she has not had discussions with the financial rating agencies as to whether the bond would hurt Pennsylvania’s financial rating.
Sen. Eichelberger asked for the panelists’ thoughts on the governor’s proposal to move to passive management systems. Grossman reported that over the past year PSERS has paid $482 million in management fees and gotten $1.27 billion above the index for those fees, thus the system is getting value from the fees. He said moving to a passive-only strategy would require a revisit of the assumed rate of return, explaining that passive systems cannot make the same investments. Brier added that capturing that premium is critical component of SERS’s ability to active 7.5 percent.
Lastly, Sen. Eichelberger asked for an explanation of double investing. Brier explained that is a fund to fund model where a general partner will access other funds on behalf of the system where it is more efficient to do that. He gave an example of a partner that gets SERS access to a China fund that it does not otherwise have access to. He added that SERS has reduced fund to funds costs by about 60 percent and reduced overall portfolio fees by $70 million, adding that SERS’s fees are now about 66 basis points which is close to the governor’s goal of 60. Becker noted that reported returns are reported net out fees.
Sen. Blake, minority chairman of the Finance Committee, called for a discussion of the facts of pension reform and remarked on the many changes that have affected the systems over the past decade, including a $70 billion swing in the unfunded liability, four downgrades by rating agencies, and the commonwealth only making 40 percent of actuarially required contributions. He praised the governor’s proposal, which does not increase the unfunded liability, ensures retirement security, does not conflict with the impairment of contracts provision, and provides relief for school districts as well as the General Fund. Regarding the proposed pension obligation bond, he asked if the governor’s claims that the bond can be used prudently and effectively are true. Sanchez reiterated that PSERS would get a $3 billion cash infusion in 2016 which would provide a $3 billion reduction to unfunded liability and amortized over the years the system would see savings and a reduction in contribution rate. She could not speak to the impact of the bond on the financial rating.
Sen. Blake referred to SB 922 of last session and asked for a review of the actuarial analysis. Durbin could not recall the specifics and offered to get that information to the committee. Sen. Blake recalled that the bill would nearly double the unfunded liability.
Sen. Blake then asked what PSERS did with the $255 million in tobacco settlement assets it received. Grossman confirmed the transfer happened at the end of the calendar year and said PSERS received $87.5 million in cash and $137 million in net assets went into about 15 different line items. She said they have not been sold. Sen. Blake said it is important to note that was meant to reduce the General Fund obligation of meeting the required contribution. He contrasted that with Gov. Tom Wolf’s action that would require the commonwealth to meet the obligation.
Sen. Blake asked how many employees under Act 120 are in the system. Sanchez replied about 38,000, or 14 percent of total active membership, are post-Act 120. Durbin said about 22 percent of SERS members are post-Act 120 and noted that ten percent of those members have elected to pay the higher benefits to get the higher multiplier. He confirmed Sen. Blake’s recollection that the lump sum withdrawal option was removed in Act 120.
Sen. Blake remarked on the generosity of the pensions and asked what the average benefit is. Sanchez replied the average PSERS pension is just under $25,000 per year. Durbin reported SERS’s average is $26,400 but the median is $21,000. Sen. Blake commented on the important of retirement security.
Speaking to fees, Sen. Blake recalled that the Treasury testified that the question is not one of passive versus active investments but more a question of where efficiencies can be found. Brier reported SERS has reduced the total cost to manage the fund by $7 million over the past five years and the board has tasked the system with reviewing each asset class and identifying the optimal structure. He said the system is specifically looking for ways to reduce costs further. Sen. Blake commented it is important to know what Act 120 accomplished and to know that workers really agreed to a 25 percent cut in benefits and increased share of risk.
Sen. Rafferty discussed the trend of private sector employees leaving an organization at an earlier age for a different career and asked if the state systems are seeing similar trends. Sanchez replied she has not noticed such a trend. Durbin agreed there hasn’t been much of a trend of demographic moves, but pointed out employees will leave if they believe contract negotiations will not result in their favor, and vice versa.
Sen. Rafferty asked if the investments of investment managers are approved by the systems. Grossman replied the investment managers have full discretion, but if they do poorly overtime they can be fired. He said the standards for firing depend on the circumstances of timing of firing. He estimated 50 firings have occurred in the past five years. Brier said SERS has approved criteria for identifying why specifically someone should be removed and every quarter the board receives a report. Sen. Rafferty asked how active managers are chosen. Grossman indicated they are interviewed and approved by a consultant. Brier said SERS’s board is reviewing the asset classes and looking forward at capital markets and decides the appropriate amount of active and passive investments. He said three main criteria are examined: the people who run the money, the process they use, and their performance. The recommendation is sent to the board who makes the final decision. Sen. Rafferty asked if the systems look at similarly situated funds the individual is managing. Brier confirmed reference checks are completed, but said the process is primarily driven by the system’s strategy.
Sen. Rafferty asked if the boards are subject to a gift ban. Durbin said SERS has considered the question of whether to adopt the governor’s ban but hasn’t yet decided. Sanchez reported PSERS has adopted a gift ban and the governor’s ban on top of that.
Sen. Vogel asked how many employees are in the deferred compensation program. Durbin reported that is a “great program” with more than 51,000 participants. He said the program is entirely funded by participants and in excess of $3 billion is in that fund. Sanchez said PSERS does not have a similar program, but noted school districts do have a similar type of plan available, which varies from district to district.
Sen. Teplitz noted the money in the two funds comes from employee contributions, employer contributions, and investment earnings. Of those three sources, he continued, the employer contributions have historically not been where they should be and the investment earnings have faced challenging markets. He asked if it is correct to say the current situation has not been caused by the structure of those funds. The panelists generally agreed. Sen. Teplitz asked if any changes to the benefit site would address the unfunded liability. Sanchez replied Act 120 made a huge difference on the benefit side and brought normal cost below three percent. She said the system has seen $24.65 billion in savings from that act. Durbin added that the unfunded liability is the benefit that has already been earned and to lower it would have to affect those benefits. He opined there are serious questions that could apply to the pre-Act 120 employees that have not yet been explored to see whether they could survive a legal test. Sen. Teplitz asked if it is correct that the unfunded liability is the amount that would be paid out if all the benefits had to be paid at once. The panelists confirmed this and agreed such a scenario is unlikely.
Sen. Teplitz asked if the boards have a conflict of interest policy and what training board members receive. The panelists confirmed both boards have such a policy. Sanchez said PSERS provides basic orientation for board members and educational sessions twice a year as well as opportunities to attend different functions and events. Additionally, board members can always meet with staff for more explanations. Durbin said SERS’s policy is not quite as formal, and explained board members are provided orientation, policies and guidance and staff is always available to answer questions. He indicated more effort has been put into discussing such topics at regular board meetings.
Sen. Teplitz asked if the systems consider whether a company is based in Pennsylvania when making investments. He opined this could help the state’s economy. Grossman confirmed PSERS looks at Pennsylvania investments and wants to make investments in Pennsylvania where all things are equal. He added that thirty percent of assets are managed by mangers in Pennsylvania and more than $2 billion is directly invested in Pennsylvania companies. He also noted the initiation of a Pennsylvania-based co-investment program, noting Primanti Brothers is an early participant. Durbin said SERS has a policy that when all considerations are equal, the preference is for Pennsylvania.
Sen. Vance asked if Sanchez’s data about the pension obligation bond considers the cost to float the bond. Sanchez indicated that is not factored in because PSERS’s role will merely be to receive the proceeds of the bond.
Sen. Vance commented on the “top heavy” nature of the demographics in the systems, noting SERS has 104,000 active members and 122,000 retired members. Durbin agreed and explained that retirees’ benefits are fully funded. He said the system continually looks at its factors for mortality and makes adjustments where necessary. He added that Pennsylvania’s longevity is not as good as the national average. Sen. Vance remarked Pennsylvania’s fastest growing population is those above age 85 and the youth growth is not keeping pace.
Speaking to basis points, Sen. Vance asked why the systems’ payouts are higher than private firms. Brier replied the number has come down dramatically and the system will continue to see progress. He said the board negotiated very competitively and is aggressively focused on bringing the numbers in line and making them competitive.
Sen. Vance then asked about one of PSERS’s graphs in the budget book and asked who is doing the underfunding. Sanchez clarified that refers to the employers. Sen. Vance asked how often the underfunding has occurred recently. Sanchez replied “it is not that they’re not paying,” but that is how the actuarial assumption and amortization methods are calculated under Act 120.
Sen. Vance asked the panelists’ their opinions of pension obligation bonds. Sanchez replied PSERS is happy to receive $3 billion. Durbin offered no thoughts, as SERS is not slated to receive the proceeds of the bond.
Sen. Mensch agreed that the unfunded liability will not be due in one day, but said it does represent a cost and the employer contribution needs to increase. He said the state will pay $28 billion this year and that amount will grow to $5 billion in a few years. He said this has very real tax implications. Sen. Mensch then asked why only PSERS would get the proceeds from the pension obligation bond. Durbin did not know, but welcomed any extra money. Sen. Mensch pointed out the bond would save $8 billion, but suggested those savings would be offset by inflation. Sanchez indicates that depends on the costs of the bond and declined to speak beyond the impact on the system. Sen. Mensch opined the proposed bond seems like a bad deal for Pennsylvania. Vogler likened the situation to delaying payment on a credit card with interest compounding. She said some of the problems were from the collars, some of the problems were legislative decisions to pay in less than was required, and concluded the debt will keep increasing the longer the payments are put off. Sen. Mensch agreed, continuing the analogy and stating that the commonwealth keeps using the credit card but is not trying to stem the exposure of the pensions from expanding. He then referred to page 11 of the PSERS budget book and opined the numbers do not represent a complete benefit because dollars that are already being taxed are being taxed again.
Sen. McIlhinney asked how SERS would be impacted if the liquor divesture proposal, HB 466, were to become law and all employees of the liquor system were terminated on a date certain. Durbin said the Liquor Control Board has a $285 million share in the unfunded liability and if the agency was eliminated, the system would be required to collect $24 million each year for 30 years. Sen. McIlhinney suggested those costs were not considered in the anticipated proceeds of the proposal.
Sen. Greenleaf remarked the commonwealth does not have a pension problem, it has a debt problem. Sanchez said the normal cost of post-Act 120 members is lower than three percent and is one of the best normal costs for such a plan. On the benefit side, she continued, there has been reform and it has reduced the cost, but the $35 billion unfunded liability exists because of benefit enhancements and funding deferrals that caused funding problem. Sen. Greenleaf questioned if it would be beneficial to reduce benefits further, noting that Act 120 was a reduction in benefits. He also asked about a defined contribution system, noting that he has heard of two states that switched to defined contribution systems and now they are in trouble. Sanchez replied, based strictly on numbers, a new design that costs less than three percent would save money. She said it all depends on the new system’s normal cost. Durbin concurred normal cost is a way to evaluate the cost. He added that the problem in Pennsylvania is that normal cost is so embedded in unfunded liability and that shades the true value. He did not offer strong feelings on defined benefit versus defined contribution plans, but simply said any plan needs to be structured adequately and funded.
Sen. Greenleaf asked how to pay off the debt. Durbin replied the collars of Act 120 will eventually pay off the debt, it will just take money and time. He said rates return to the five percent range in 2041. Sanchez indicated PSERS faces a similar fate.
Sen. Greenleaf pointed out that index funds have been seeing returns of almost eight percent and asked if that is a way the state should go. Grossman replied the system uses index funds where it make sense, noting index funds account for about 20 percent of the PSERS fund. He added that where fees have been paid, the system has had index returns plus returns that more than covered the cost of the fees. He called for the flexibility to use both options. Brier indicated SERS has taken a similar approach in that the system only pays a premium where the benefit exceeds the cost over time.
Sen. Scavello recalled that he called this strategy “kicking the can forward” years ago, but no one was complaining at that time. He pointed out a former member of the House had proposed an amendment to match the teachers’ contribution and lamented that the funds would be in better shape if that had been enacted. He then asked if the systems match Standard and Poor’s (S&P). Grossman indicated PSERS has seen a return of 8.83 percent this year and the S&P 500 is above 13. He pointed out that the system cannot simply follow S&P, recalling the 57 percent drop in 2007. He said it is difficult to make money back in volatile asset classes, which is why the system diversifies its investments.
Sen. Scavello noted earlier testimony that PSERS had fired 50 managers in the past five years and asked why they were hired. Grossman explained hiring decisions are based on considerations such as philosophy and asset classes. He said the managers weren’t performing to expectations and noted that the system diversifies managers like it does the portfolio. Sen. Scavello referenced data that $180 million was paid to managers and $3.3 billion was received. Brier confirmed that is above the index over a ten year period. Sen. Scavello indicated PSERS’ cost was $400 with a return of $1.7 billion. Grossman confirmed that was over a year.
Sen. Schwank remarked on the importance of the public understanding the median pension payout. She opined it is not necessarily the role of the systems to determine what plan design should be, but she discussed the need to get good advice before advancing a proposal. She called for consideration of SB 564, which establishes the Public Pensions Review Commission. She asked if the system boards have discussions about policies. Durbin replied the board is always informed, but does not take policy positions because that is the purview of the legislature. Vogler agreed PSERS’s board would represent any plan it is asked to represent, regardless of personal feelings. She said PSERS has always tried to provide as much information possible and is dedicated to presenting the facts. Sanchez confirmed the system would be happy to assist the legislature in assessing the impact of a proposal.
Sen. Wiley agreed with Sen. Schwank’s proposed approach to make an educated decision. He said too often decisions are made quickly, before all information has been gathered. He then asked for an explanation of the impact of the proposed pension obligation bond. Sanchez reiterated $3 billion would be deposited into the fund and amortized over 24 years, reaping a savings of about $8 billion with an assumed rate of return of 7.5 percent. She said the savings are reflected in reduced contribution rates of about 1.5 percent throughout that time. Sen. Wiley called this a bold initiative. He then asked about the impact of Act 120. Sanchez said Act 120 saved $103 million on the benefits side. Sen. Wiley remarked this was a bold move to reduce the obligation. He said Budget Secretary Albright characterized the pension situation as an obligation, not a crisis, and asked the panelists if they agree with this characterization. Sanchez replied the situation is causing a challenge, but declined to characterize what it means to the legislature.
Sen. Baker asked how the governor’s proposed 6.6 percent sales tax on professional services would affect the systems. Durbin replied SERS does not really track where the money comes from and does not know the origin of the dollars. Regarding the plan, he added that he has not looked at the proposal closely but noted the state is not typically taxed. Sen. Baker asked Durbin to share information on the plan with the committee. She then asked how the federal health care law has impacted the systems. Sanchez replied the impact of Obamacare on PSERS is minimal because it is primarily for those under age 65 and more than 95,000 Medicare-eligible participants are in the plan. Durbin said PSERS collects what an individual owes and enrolls them, but the plan provisions are not under the system’s purview. She couldn’t comment on whether the federal requirements would have an effect.
Sen. Baker asked for projections of the ratio of active members to retirees. Durbin said he would get that information to the committee and noted that SERS enrolled 10,600 new members last year, which is the biggest number in the past eight years. Sanchez said PSERS reviews assumptions every five years, noting that the next review will be at the end of 2015.
Sen. Vulakovich asked for data on the average length of service in PSERS and the average pension. Sanchez said the average age is 60 and the average pension for annuitants and survivor annuitants is just under $25,000. She offered to provide more specific data to the committee. Sen. Vulakovich commented that some teachers have really low pensions whereas the newer teachers get a pretty good pension. He asked for data from 2000 onward, remarking that is the number that will grow. He further remarked on the flaws in the system, including the lump sum withdrawal and the failure of the state to contribute more than $12 million. He remarked that money should have been put it, but it is not the only reason for the current situation. He opined that 7.5 percent assumed rate of return is too high. Sanchez noted it is the median. Sen. Vulakovich countered Pennsylvania is not the median; it is in trouble. He said members have never shared in the cost and asked how many pull their money out. Sanchez replied 88 percent. Sen. Vulakovich asked if the systems were ever 100 percent funded. Both Sanchez and Durbin confirmed both systems were more than 100 percent funded circa 2000. Sen. Vulakovich continued, expounding on the mistakes made. He suggested Sen. Schwank’s bill would be a good idea, except that the systems will not offer opinions. Regarding bonds, he concluded, they are not a good deal.
Sen. Smucker asked if the systems have completed analyses that offer comparisons to other systems. Sanchez indicated PSERS could likely access that information. Both Sanchez and Durbin confirmed no analyses offering comparisons with private systems have been completed. Durbin noted that many private sector plans are very individualized, making comparisons difficult. He mentioned a Commonwealth Foundation analysis a few years ago that said four to seven percent is a reasonable cost, and reiterated SERS is at five percent. Vogler pointed out that private sector pensions quite often do not require member contributions. She remarked on the differences between public and private plans and said it would be like comparing apples and oranges. Sen. Smucker opined a comparison of public and private plans is needed so the state can make corrections if the public plans far exceed the private plans. Vogler opined retirement security will be a big problem nationally.
Returning to the subject of the gift ban, Sen. Smucker asked for clarification on where PSERS stands. Sanchez explained the board has agreed to adopt the policy and staff has been counseled that they are to follow the gift ban policy. Sen. Smucker opined the state should have a comprehensive policy that applies to all state government branches. Continuing, Vogler said the board has not voted on the gift ban yet, but is operating under it until it is able to write the system’s policy. She indicted a few peculiar problems need to be addressed. Sanchez noted some board members are exempt, particularly the legislative ones. He deferred to counsel for a more complete answer. Durbin added that SERS has a gift ban policy and the board has talked about joining the governor’s ban but has not taken a position on that. He anticipated a vote, but said some questions, such as travel status regarding different cultures, need to be addressed. Becker interjected the system is in favor of a gift ban and following it in spirit. Sen. Smucker noted he was particularly interested in knowing how the ban applies to legislators on the board.
Chairman Hughes pointed out that SERS paid out $3 billion in 2014 and asked how much of that stayed in Pennsylvania. Durbin replied $2.7 billion stayed in Pennsylvania and Sanchez said $5.5 billion of the $8.2 billion paid out by PSERS stayed in Pennsylvania. Chairman Hughes emphasized the economic impact of these payments and asked if the systems have data on that. Durbin said the system has not taken a “downstream approach.” Grossman agreed, but acknowledged the senator’s point. Chairman Hughes continued to emphasize the economic benefits, highlighting his mother, a 30-year teacher who like most retirees is spending money at home.
Looking at private plans, Chairman Hughes cited an analysis that 47 percent of 401k participants took out more than 20 percent of savings prior to retirement and nine percent borrowed more than fifty percent, which he said left them with a lot less money at retirement. He asked about the impact of such options on retirement. Sanchez replied PSERS has not studied that, noting it is not allowed in the system. Durbin agreed. Chairman Hughes remarked on the devastating effect on the systems if members could “yank their cash out.” Grossman agreed that would be difficult in a defined benefit plan. Chairman Hughes said he has heard that about 20 percent of retirees in 401k’s usually wind up with nothing. He expressed concern about proposals to change to a new plan design, pointing out that the retirees would end up on state programs if they did not have any money at retirement. Chairman Hughes also asked about the fee structure of 401 programs. Durbin mentioned the deferred compensation program paid by individuals. Regarding payments for underperformance, he said that’s possible in any investment. He said SERS spends a lot of time working with staff to assess investments.
Chairman Hughes asked if it is correct that Act 120 made changes for state employees, including a reduced multiplier to 2.0 and reduced payout options. The panelists confirmed this. They further confirmed that the state has made its required contributions since Act 120. Durbin added the issue is the unfunded liability. Chairman Hughes commented on the difficulties in working in an environment complicated by the collapse in international economy. He concluded by reiterating the importance of the economic impact of the payouts.
Chairman Browne asked if five percent normal cost for SERS is blended. Durbin replied it is now. Sanchez said PSERS’s normal cost is three for just Act 120 and the blended normal cost is 3.38.
Chairman Browne commented on the importance of remembering that the pension cycle needs a long term focus. He asked if it is correct that the total fund performance over ten years is 6.6 percent. Durbin confirmed this. Chairman Browne asked how that relates to benchmarks. Brier reviewed the custom benchmark and said recent benchmark studies have changed. He said the fund did somewhat underperform and that is why the system is looking to reduce costs.
Chairman Browne asked if the unfunded balance has increased since the assumed rate is 7.5 percent. Brier confirmed this. Durbin said the salary is 6.1 percent. Sen. Browne asked why it is so high when inflation is not that high. Sanchez explained the number includes a factor for inflation and salary increase over an entire career. Durbin said SERS uses a 2.75 adjustment factor. Sen. Browne called for a more conservative factor.
Chairman Browne then discussed the Act 120 benefit opportunity to receive a higher benefit for paying more in. Sanchez said a little more than 14 percent of PSERS members participate in that option. Chairman Browne expressed surprise at the numbers, remarking that it is a smart choice for retirement security. Sanchez commented industry experts are surprised how low the rate is, but explained new employees have a hard time understanding the point. Durbin said it is difficult for a new employee to make a retirement selection, remarking that he had only intended to stay for five years but he has now been at SERS for 35 years. He said the problem is convincing new employees that they need to make the choice now. Chairman Browne offered his thoughts about a transition to a 401k-type structure and said those issues would have to be considered as well as structural issues.
Regarding pre-Act 120 considerations, Chairman Browne asked if conversations have been held about reforms that affect post-Act 120. He noted pre-Act 120 is at nine percent and asked what the legislature should consider per Durbin’s earlier comments. Durbin suggested prospectively reducing the multiplier for pre-Act 120, but could not say whether it would survive a legal challenge. He said any change to any part affects potentially the benefits paid. He said the question is whether the change will stand up to a challenge.
Chairman Browne expounded on the governor’s proposal to issue a pension obligation bond and remarked on the conscious choice the legislature made in 2010 to make the bonds illegal. He suggested the net effect of the bond would be negative for the commonwealth, thus adding pressure to the General Fund.
Chairman Browne then asked for comments about the governor’s proposal regarding investment fees. Grossman indicated he has not discussed the proposal with the governor, but said historically the plans can get excess returns from fees. He said the system scores on risk return basis and tries to achieve 7.5 percent at the lowest possible rate. He added that the system wants to be involved in discussions. Chairman Browne indicated that a fee that results in a higher return is worthwhile. He suggested the analysis should be based on return, not active versus passive. Becker added that the higher fees tend to be in nonpublic moneys, but that’s where the returns are.
Regarding the potential transition from one plan design to another, he asked the costs of a fully funded plan transitioning. Durbin indicated a fully funded plan is easier to transition. Chairman Browne said he has concern that as people age in the plan, the investment portfolio needs more cash to pay benefits. He said that has to happen regardless. Durbin commented on the need to make accommodations and examine risk with that kind of liquidity demand. Chairman Browne said there is a lot of confusion and disagreement on transition costs. He remarked on the need to look long term in terms of costs, adding that longevity is probably in the 90s now and retirement time can be as long as work experience. He added that pre-Act 120, Social Security plus the benefit is 140 percent of salary and post-Act 120 it is 120 percent. That’s really tough to sustain, he said, and called for long-term consideration.
Robert Storm
Eastern Region Vice President
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