Category: Pension

The California Supreme Court ruled on Monday that the elimination of a programme allowing public workers to boost their pensions was constitutional, but it sidestepped the bigger issue of constitutional protections for increasingly expensive public worker pension benefits that are eating away at the state’s finances.

The case brought by a California firefighters union against the California Public Employees’ Retirement System (CalPERS) appeared to be a candidate to test the legal right of public sector workers to accrue the same level of pension benefits throughout their career. This so-called California rule has limited the ability of the state to cut retirement benefits as a way to ease pension costs.

Josh McGee, a senior fellow at the conservative Manhattan Institute, said the ruling leaves California with rising costs that are increasingly competing for money needed for state services.

“By sidestepping a ruling on the California Rule, the supreme court didn’t solve anything. They left a big unknown out there to be determined at a later date,” he said.

The high court affirmed previous trial and appeals court rulings that found the ability of public workers to purchase up to five years of additional service credit to boost their pensions was not protected by the state constitution’s contract clause.

The elimination of that program was part of a California pension reform law that took effect in 2013. Given its ruling, the supreme court said it would not take up the issue of whether the program’s termination was an unconstitutional impairment of workers’ rights.

“Because we conclude that the opportunity to purchase ARS (additional retirement service) credit was not a term and condition of public employment protected from impairment by the contract clause, its elimination does not implicate the constitution,” the opinion stated. “For that reason, we have no occasion in this decision to address, let alone to alter, the continued application of the California Rule.”

– Culled from Reuters

Until the last few years, all Washington could talk about was how to cut Social Security benefits, and by how much. But a grass-roots progressive coalition began campaigning for expansion in 2013, and the idea has since moved straight to the heart of the Democratic Party.

That was evident this week when U.S. Representative John Larson introduced his Social Security 2100 Act in the House of Representatives. The Connecticut Democrat’s proposal calls for a small across-the-board bump in benefits, a more generous annual cost-of-living adjustment and a higher minimum benefit for low-income workers. Larson’s plan would pay for the expansion in two ways.

First, it would add new payroll taxes to wages over $400,000 (currently, tax collection stops at $132,900 of annual income). The bill also would gradually phase in a higher payroll tax rate, with workers and employers each paying 7.4 percent by 2042, compared with the current rate of 6.2 percent.

This is not the first time Larson has proposed this legislation, but this year it stands a very good chance of passage in the House. The proposal had 54 co-sponsors when Larson first introduced it in 2015; now, it has more than 200 House co-sponsors – more than 85 percent of the Democratic majority.

Larson himself is the new chairman of the Social Security subcommittee of the House Ways and Means Committee. The new chairman of the powerful Ways and Means Committee, Massachusetts Democrat Richard Neal, is a co-sponsor of the bill.

David Mitchell wanted plain English answers but was met with 10 years of confusing jargon.

Years of flattering fund reports from Prudential convinced David Mitchell, 69, that he was due a fair-sized pension. When it didn’t materialise, he launched a decade-long campaign for answers in plain English. But experts say financial firms are still bamboozling consumers and putting them at risk.

“Prudential has sent me kilos of information, but in my opinion no complete, clear financial account that I as a retail customer can understand,” said Mr Mitchell, a former head gardener to the Queen who for five years lived in the grounds of Buckingham Palace.

He is among millions of savers who bought investment bonds, endowments, insurance and, in his case, pensions, invested in insurers’ “with-profits” funds.

Customers were often given little explanation of how the complex funds worked when they were heavily sold in the Nineties. Shortfalls in endowment mortgages based on with-profits funds led to a major mis-selling scandal.

James Daley of Fairer Finance, a consumer group, said: “With-profits documentation has always been complex and impenetrable to the average consumer. Way back in 2001, the Consumers’ Association, now which? was campaigning for more transparency and plain English, but the battle was never won.”

• Culled from The Telegraph