July 2007

Grant Results

SUMMARY

According to a 2002 survey by the Council of State Governments, states will face an increasing shortage of qualified public health workers over the next decades. Offering portable pension benefits is a strong incentive for recruiting and retaining qualified public health leaders, making it easier for them to move from one state or public health system to another, thereby serving as sources of innovation and improved practice.

In 2006, investigators with the Council of State Governments, Southern Legislative Conference conducted a 50-state survey and produced a white paper examining the portability of pension benefits for public health officials.

The survey examined four mechanisms that allow portability of benefits: direct rollover from a previous employer, the installment purchase of service credits, pretax purchase of service credits, and interstate and intrastate reciprocity agreements.

Key Findings
Investigators received a 100 percent response rate from the survey respondents, who included public officials charged with overseeing and administering retirement plans in the 50 states.

They reported their findings in a white paper, entitled "Pension Portability Among Public Health Officials." Key findings include:

  • All 50 states offered a defined-benefit plan to their public employees, including public health officials; 26 offered only a defined-benefit plan, while the remaining 24 states responded that they offer both defined-benefit and defined-compensation plans. Although benefits are portable under both plans, a worker's ability to transfer accumulated benefits upon changing jobs is less complicated with a defined-compensation plan.
  • More than half (28) of the 50 states that maintain defined-benefit pension plans do permit direct rollovers into their plans from public health officials who had terminated service at another employer and sought to transfer funds from the qualified retirement plan of the previous employer. The remaining 22 states do not permit such direct rollovers into their defined-benefit plans.
  • Eleven states with defined-compensation pension plans accept direct rollovers.
  • The purchase of service credits, either by installment or with pretax dollars, is the most common approach to portability in defined-benefit plans. Of the 50 states with defined-benefit plans, 37 allow the installment purchase of service credits by public health officials, and 36 permit them to use pretax dollars to purchase credit for time previously served in another public entity.
  • Among states with defined-compensation plans, only two allow installment purchases, and only three permit employees to use pretax dollars to purchase credit for time previously served in another public entity.
  • A majority (36) of the states indicated they have agreements permitting intrastate reciprocity between eligible plans in their own states. The remaining 14 states indicated they do not have such agreements permitting reciprocity at the intrastate level.
  • At the interstate level, four states have agreements that permit the purchase of credits for out-of-state service, a relatively rare trend in the realm of public pension plans.

Other Activities
In addition to the survey, investigators conducted a literature review of publications from groups such as the Council of State Governments, the U.S. Department of Health and Human Services, and the Pension Benefits Guaranty Corporation.

Funding
The Robert Wood Johnson Foundation (RWJF) provided a solicited grant of $23,584 to support this project.

After the Grant
The project team distributed copies of the white paper to survey respondents in the 50 states and members of the Southern Legislative Conference. The white paper is available online from the Web site of the Council of State Governments, Southern Legislative Conference.

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GRANT DETAILS & CONTACT INFORMATION

Project

Study on the Portability of Benefits for Public Health Officials

Grantee

Council of State Governments (Atlanta,  GA)

  • Amount: $ 23,584
    Dates: January 2006 to June 2006
    ID#:  056264

Contact

Colleen Cousineau
(404) 633-1866
fitzgerald@csg.org

Web Site

http://www.slcatlanta.org/staff_and_structure/about_us.htm

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APPENDICES


Appendix 1

Glossary

In a defined-benefit pension plan, retiring employees receive a specified retirement benefit, based on age, years of service and salary, throughout the duration of their retirement. These retirement benefits are funded systematically by contributions, usually from employer and employee, and the investment income resulting from these contributions.

In a defined-compensation pension plan, the amount contributed to the plan by the employer is specified, but the benefit payout is not. Under this system, the benefit payout to retirees flows from the contributions and investment income that accrue in each participant's account. Plan participants maintain a great deal of discretion on where to direct their investments, within certain investment parameters, or options, preselected by the employer.

Having portable pension benefits gives an employee the right to move future pension benefits to a new employer without losing any benefits as a result of the job change.

The purchase of service credits allows an employee to receive credit for years of work that would otherwise be lost due to changing jobs and working too few years at a specific agency in order to secure the maximum retirement benefits allowed. Two important considerations in portability involve the installment purchase and the pretax purchase of service credit for public health officials.

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Report prepared by: Richard Camer
Reviewed by: Jayme Hannay
Reviewed by: Molly McKaughan
Program Officer: Carol S. Chang

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