Posts Tagged "Connecticut"
July 12, 2022
Public-Sector Pensions Weathered Pandemic
The economic turmoil in the early months of the pandemic – a plunging stock market and soaring unemployment – posed a real threat to state and local government pension funds and the workers who rely on them.
One group was particularly vulnerable: public-sector workers who aren’t covered by Social Security and lack the backstop of the federal government if their employer pension plans get into trouble.
The Center for Retirement Research has some good news for these 5 million noncovered workers living in 20 states. Their pension plans got through the first two years of the pandemic unscathed.
In dollar terms, government contributions to these defined benefit pension plans actually increased during COVID. That and a roaring stock market in 2021 significantly improved their financial condition. Of course, this sunny report is clouded by what is happening to the stock market now – it has reversed course and dropped 20 percent this year.
But the researchers’ assessment is that COVID was not the financial disaster many had feared for the public-sector workers who aren’t covered by Social Security.
The 59 noncovered plans in the study vary in size from small local pension plans like the Pittsburgh Police Relief and Pension Fund to the nation’s largest state plan, the California Public Employees Retirement System.
Congress’ financial support during COVID played an important role in stabilizing state and local governments’ finances. They received hundreds of billions in pandemic relief from the CARES Act in March 2020 and, a year later, the American Rescue Plan. The federal relief checks to families and businesses also added billions to state and local tax bases. Importantly, tax revenues snapped back after a brief drop in 2020, because high-income workers, who pay more in taxes, didn’t suffer the dramatic layoffs experienced by low-income workers.
The federal support provided the fiscal breathing room for governments to make their pension contributions on schedule. In fact, some of the states with the most poorly funded plans – namely New Jersey and Connecticut – took advantage of the fiscal windfall to make historically large contributions in 2022. …Learn More
July 20, 2021
State Auto-IRAs are Building Momentum
About half of the nation’s private-sector employees do not have a retirement savings plan at work, and that hasn’t changed in at least 40 years.
Some states are trying to fix this coverage gap in the absence of substantial progress by the federal government in solving the problem. And the state reforms are gaining momentum.
In the past year alone, Maine, Virginia, and Colorado have passed bills requiring private employers without a retirement plan to automatically enroll their workers in IRAs, with workers allowed to opt out. New York City, which is more populous than most states, approved its program in May. And other states are either starting to implement programs or looking at their options.
Auto-IRAs are already up and running in California, Illinois, and Oregon, where a total of nearly 360,000 workers have saved more than $270 million so far. The programs are run by a private sector administrator and investment manager.
These mandatory programs are the only practical way to close the coverage gap, because voluntary retirement saving initiatives have never done the trick. Numerous voluntary plans created by the federal government – such as the Simplified Employee Pension (SEP) – have failed to measurably increase coverage.
Large corporations usually offer a 401(k) plan and match some of their workers’ savings. But millions of restaurants, shops, and other small businesses either can’t afford to set up their own 401(k)s or don’t see it as a priority. Without additional saving, half of U.S. workers are at risk of a drop in their standard of living when they retire.
State auto-IRA programs eliminate the administrative burden and expense to employers of a private plan and provide an easy way for workers to save. The money is taken out of their paychecks before they can spend it and is deposited in an account that grows over time. The state programs also permit workers to withdraw their contributions without a tax penalty for emergencies, like a medical problem or broken-down car, if they need the money they’ve saved. …Learn More
March 4, 2021
Federal Minimum Wage is 40% Below 1968
Largely missing from the debate about raising the federal minimum wage is how much its value has eroded over the past 50 years.
The current federal minimum is $7.25 an hour. If the 1968 wage were converted to today’s dollars, it would be worth about $12 an hour.
At $7.25 an hour, a full-time worker earns just over $15,000 a year before taxes, which is less than the federal poverty standard for a family of two. The Biden administration has proposed more than doubling the federal minimum to $15 by 2025, and one proposal in Congress would begin indexing the minimum wage to general wages so it keeps up with inflation.
A $15 an hour minimum isn’t enough, said one sympathetic Florida contractor who voted in November to gradually increase the state’s mandatory minimum wage to $15. “I’d like to see some of the American people go out there and try to make a living and put a roof over their head and raise a family,” he told a reporter. “It’s literally impossible.”
But small businesses say raising the minimum wage would increase their financial pressures at the worst time – during a pandemic. At least 100,000 U.S. small businesses closed last year as governments restricted public gatherings to suppress the virus, and the Congressional Budget Office (CBO) estimates a higher federal minimum could eliminate 1.4 million jobs.
This evidence ignores the complexity of low-wage workers’ situations. Employee turnover is extremely common in low-wage jobs in fast food establishments, for example, and workers frequently have bouts of unemployment that further reduce their already low earning power. Raising the minimum wage could somewhat compensate for their spotty employment and provide more money for essential items. And while the CBO warns of job losses, it also predicts that a higher federal minimum wage would lift 900,000 million workers out of poverty.
Many states have approved incremental automatic annual increases, and a $15 minimum wage has been approved in eight states, including Florida. Voters – over the objections of the Florida Chamber of Commerce – approved raising the state’s minimum wage from $8.65 this year to $15 in 2026.
“We won’t get fifteen for another five years. We need that now,” an Orlando McDonald’s worker, Cristian Cardona, told The New Yorker.
Once again, inflation is a problem. “By the time we get fifteen, it’s going to be even less,” he said. …Learn More