LEGISLATIVE REPORT: PENSION LAW AND POLICY
By Michael Karsch
The major issue for public pension plans in California is the State Supreme Court’s consideration of the Cal-Fire case as to how far the “California Rule” can go in protecting any changes in a pension plan, such as striking down extra benefits like purchasing “air time,” “spiking,” loading up on overtime just before retirement, etc. An appellate court has suggested that a Retiree has an expectation that his or her pension will not be substantially changed, implying that there is room for some changes, but not affecting those who have worked their time in public service and retired already. Gov. Jerry Brown wants the court to consider the flexibility introduced by his pension reform bill enacted in 2013 to allow a jurisdiction to reject extra benefits as suggested above.
MarketWatch reported after the midterm elections in early November that there is little to fear from the results in pensions in general (public sector and private sector). Congress is now divided between the Democrat House of Representatives and the Republican Senate, and the White House remaining Republican. Ultimately, any bill changing anything like Social Security, Medicare, retirement savings and pensions is not likely to succeed because the president will hold the ultimate power of the veto. The MarketWatch writer (Alessandra Malito) noted that both parties were quiet about Social Security and Medicare, and that Social Security is 93 percent funded for the next 25 years. Hearings can be expected to be held in the House on Social Security issues, she added. For the area of private investment advisors for individuals seeking to set up their own savings plan, like an IRA or 401(k) plan where they have no formal pension, or do have a pension but want to supplement it, there is the Department of Labor’s fiduciary rule set up under the Obama administration to apply to those advisers. The rule forces those advisers to act in their “client’s best interests.” This rule was halted by the Trump Administration, but it could change in 2019.
There appears to be changes to the Medicare prescription drug rules by the Trump Administration. According to the Associated Press in late November, the changes will have winners and losers. The article quoted the Kaiser Family Foundation: “Some could see cost-sharing for their drugs go down, but premiums are expected to rise.” Another proposed change is giving more leeway for insurers to exclude a specific drug in Medicare’s six “protected classes” of medications (like antidepressants, drugs to treat psychosis, anti-seizure medications, cancer drugs, medications to prevent rejection of transplanted organs, and HIV-AIDS drugs). “Proposed changes could run into strong opposition from patient advocacy groups, which derailed a similar effort by the Obama administration.)