The SAFE Act retirement legislation authored by Sen. Orrin Hatch, R-Utah, is neither feasible nor efficient in how it proposes to secure public employee pensions, according to the Center for Retirement Research at Boston College.
In September, the Urban Institute, a nonpartisan Washington, D.C.-based think tank, scored the part of the SAFE Act that addresses public pensions and gave the legislation a perfect grade.
Among other provisions, the SAFE Act would require public pensions to make annual purchases of annuities, as opposed to making contributions to an annual fund.
That would mean the amount contributed to a pension fund, typically determined by an investment committee or union, would not vacillate, potentially leading to a pension’s underfunding.
“The purchase of an annuity guarantees a contribution rate,” Richard Johnson, the Urban Institute’s lead researcher in scoring Hatch’s plan, told BenefitsPro.
But Alicia Munnell, director of the Center for Retirement Research, takes issue with some of assumptions the Urban Institute makes in scoring Hatch’s proposed annuity solution, which mimics the movement with private-sector defined benefit plans to transfer liabilities to insurance companies.