State to study health of public employee pension plan

CARSON CITY - Gov. Brian Sandoval frequently has called for an overhaul of the state public pension plan since taking office two years ago, but he won't do so in the upcoming legislative session.

Instead, the Public Employees' Retirement System board has agreed to his request for a thorough review of the plan, its assumptions and its financial health as a prelude to any changes to the plan.

The plan covers about 100,000 active state and local government workers and more than 40,000 retirees.

Gerald Gardner, Sandoval's chief of staff, said last week that the governor wants complete and accurate information about the status of the fund.

"We do have ongoing meetings right now with the PERS board to basically initiate an independent review of the PERS system," he said. "What that means, simply, is having an independent, outside reviewer, auditor, come to look at everything ... decide whether the funding mechanism is the best mechanism. Whether the rate is the proper rate. Investments. All of that stuff. Just a completely objective view."

Some lawmakers may still pursue changes during the legislative session, which opens Feb. 4, but the governor's office will not be directly involved, he said.

Assemblyman Randy Kirner, R-Reno, has filed PERS-related bill draft requests that don't specify changes he seeks.

Sandoval has advocated shifting the retirement plan for future workers from a defined-benefit pension to a 401(k)-style defined contribution plan, which would eliminate future financial liabilities for states and taxpayers. But even with that change, Nevada still must cover $11.2 billion in unfunded liabilities, as of June 30.

Gardner said the governor has no predetermined position on whether wholesale changes to the plan are needed.

Dana Bilyeu, executive officer of PERS, said the board agreed last week to spend $50,000 on the review. The study will include a comparison of all other statewide pension funds nationwide, she said.

"So it is sort of an assets management and a liability management comparative review," Bilyeu said.

The study will include a review of PERS funding policy, which dictates employee/employer contribution rates and amortization of the unfunded accrued liability.

"We anticipate using a very large, nationally reputable benefits consulting firm that has both the actuarial experience and the investment experience and is capable of doing this kind of a study," Bilyeu said. The report won't be completed until after the session, probably in June or July, she said.

Geoffrey Lawrence, deputy policy director for the conservative Nevada Policy Research Institute, expressed disappointment in Sandoval's call for a study.

"I don't think there is any mystery about what the problems are with PERS," he said. "They have a large and growing unfunded liability.

"They don't price for risk in the portfolio," Lawrence said. "And secondly, because it is a defined-benefit plan, the liabilities the system faces are guaranteed, but the return on investment is not."

The Pew Center on the States said in June that Nevada's public employee pension plan is cause for serious concern because it was only 70 percent funded as of fiscal 2010. Since then it has improved slightly, to 71 percent as of the end of fiscal 2012.

Other analyses say the long-term pension liabilities in Nevada and for plans around the country are much higher than reported in the Pew review.

Contact reporter Sean Whaley at swhaley@
reviewjournal.com or 775-687-3900.