Congressman Charles W. Boustany, Jr., MD, (R-LA), Chairman of the Subcommittee on Oversight of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on the transparency and funding of State and local defined benefit pension plans. The hearing will take place on Thursday, May 5, 2011, in Room 1100 of the Longworth House Office Building, beginning at 9:30 A.M.
In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A list of invited witnesses will follow.
Many have expressed increasing concern that State and local defined benefit pension plans (i.e., “public plans”) have become dangerously underfunded. Based on the plans’ own accounting measures, estimates suggest that as of 2009 they faced an aggregate shortfall of between $700 billion and $1.3 trillion. Many economists, however, have argued that these plans are improperly measuring their assets and liabilities in a way that significantly understates the true scope of the problem. Indeed, several recent studies have concluded that the plans may actually be underfunded by more than $3 trillion.
Growing concerns about the financial health of these public plans have led some public officials to suggest that a Federal bailout of these plans may be appropriate. The proposed FY 2012 State budget by Illinois Governor Pat Quinn (D-IL), for example, explicitly suggests that Illinois may seek a Federal guarantee of a new debt issuance to cover its unfunded pension plan liabilities.
In response to concerns about the financial health of these public plans – and about possible efforts by State and local governments to secure a Federal taxpayer bailout of such plans – Rep. Devin Nunes (R-CA), a Member of the Committee on Ways and Means, has introduced the “Public Employee Pension Transparency Act” (H.R. 567). This legislation is intended to enhance transparency in this area by encouraging public plans to disclose: (1) various plan funding data using their own actuarial assumptions, including a statement of those assumptions, and (2) the fair market value of plan assets and the value of plan liabilities using Treasury yields as the discount rate. While H.R. 567 would not impose any new standards on public plans with respect to actual funding requirements, State and local governments failing to make the disclosures proposed under the bill would lose their ability to issue debt that is tax-preferred under Federal income tax law. Additionally, H.R. 567 provides that the United States would not be liable for any obligation relating to funding shortfalls in State or local pension plans.
In announcing the hearing, Chairman Boustany said, “Whether the underfunding of State and local pension plans is $700 billion or over $3 trillion, it is a serious concern for workers and retirees, for State and local governments, and for taxpayers in general. The Subcommittee needs to understand how public plans are currently calculating their assets and liabilities, not just so we can get a clearer picture of how underfunded those plans really are, but also to determine whether there is adequate transparency in how these plans are reporting their shortfalls. Given that some have raised the specter of a Federal taxpayer bailout to cover the unfunded liabilities of these State and local plans, it is important for the Subcommittee to review this issue and to consider possible approaches to ensure that no such Federal taxpayer bailout is ever needed.”
FOCUS OF THE HEARING:
The hearing will focus on the measurement and transparency of funding levels of State and local pension plans and will explore whether improvements to those plans’ actuarial assumptions – and enhanced transparency in the reporting of the financial health of those plans – are warranted. Among the approaches to these issues that the Subcommittee will review is H.R. 567.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms. From the Committee homepage, https://waysandmeans.house.gov, select “Hearings.” Select the hearing for which you would like to submit, and click on the link entitled, “Click here to provide a submission for the record.” Once you have followed the online instructions, submit all requested information. Attach your submission as a Word document, in compliance with the formatting requirements listed below, by the close of business on Thursday, May 19, 2011. Finally, please note that due to the change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical problems, please call (202) 225-3625 or (202)225-5522.
The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, but we reserve the right to format it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response to a request for written comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.
1. All submissions and supplementary materials must be provided in Word format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official hearing record.
2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.
3. All submissions must include a list of all clients, persons and/or organizations on whose behalf the witness appears. A supplemental sheet must accompany each submission listing the name, company, address, telephone, and fax numbers of each witness.
The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.
Note: All Committee advisories and news releases are available on the World Wide Web at http://www.waysandmeans.house.gov/.