By Phil Kabler
The Charleston Gazette
An Internal Revenue Service regulation defining “normal retirement age” as 62 or older probably won’t go into effect until Spring 2016, the executive director of the state Consolidated Public Retirement Board said Monday.
In order to go into effect next year, the revised IRS regulation would have put out for public comment by mid-October, which Jeff Fleck told a legislative interim committee is highly unlikely.
“If the regulations don’t come out next month, the soonest it could go into effect would be after the legislative session of 2016,” he told the Joint Standing Committee on Pensions and Retirement.
For state and public school employees, the key concern is whether the IRS regulation will overturn the CPRB’s Rule of 80, which allows employees to retire as early as age 55, if their age and years of service equal or exceed 80.
First proposed in 2007, and with implementation delayed four, and now apparently five times, the regulation would define retirement age as no earlier than age 62, or age 50 for law enforcement officers.
Fleck said, to date, the proposed regulation has been silent on making exceptions for retirement plans calculated on age and years of service, which is commonplace in the public sector.
“We’re hoping when the revised regulation comes out, they’ll address that,” he said.
Also Monday, Fleck said the CPRB’s decision to follow a state Supreme Court decision this year expanding eligibility for military service credits to service during all armed conflicts, not just those spelled out in state law, will have a total cost of $197 million in additional pension payments to retired state and public school employees.
That will be funded by increasing the employer’s share of pension contributions by 2 percent for the next 20 years.
Fleck said legislators may want to consider eliminating military service credits for future hires, or require employees to buy in to receive service credits. He said Maryland is the only other state that gives military service credits to public employees at no cost.
Fleck also noted the state pension funds had a very good year in fiscal 2013-14, with a 17.9 percent return on investment.
That followed a 13.1 percent return in the 2012-13 budget year, growing the funds’ assets by $3.66 billion, to $16.87 billion, in two years.
Sen. Brooks McCabe, D-Kanawha, called on the Legislature to mandate pension smoothing in state retirement plans, to set aside surplus investment earnings in peak years to offset downturns.
“To think these 13 percent—17 percent returns are going to go on unabated, I think would be a mistake,” he said.