Warning of a growing public pension debt crisis, Sen. Orrin Hatch introduced reform legislation on Tuesday that would allow state and local governments to invest in annuity contracts with private life insurance companies for employee retirement benefits. But a number of pension experts questioned whether the proposal would work and at least one charged it is an effort to allow private insurance companies to raid public assets.

The senator from Utah, the top Republican on the Senate Finance Committee, introduced The Secure Annuities for Employee (SAFE) Retirement Act of 2013 in a speech before the Senate, warning, “America cannot continue sleepwalking into the financial disaster that awaits us if we do not get the public pension debt crisis under control.”

Hatch said two years ago he warned that state and local pensions had a shortfall of as much as a $4.4 trillion in their collective public pension systems, “more than the total amount of municipal bond debt nationwide.”

“Despite numerous legislative initiatives enacted at the state and local level, the public pension debt crisis has gotten worse, not better,” he told fellow lawmakers. “As usual, governments have been slow to innovate, slow to adapt, and, when they have acted, their actions have been too limited to solve the problem.”

He pointed to the financial crises of Vallejo, San Jose, Stockton, and San Bernardino, Calif., as well as Central Falls, R.I. and Detroit, Mich, saying, “Does anyone doubt that a state could be next? How many times does the credit rating of Illinois have to be downgraded before we act?”

Hatch said his bill would solve these problems by allowing governments to purchase annuity contracts for each worker every year during their career.

“With a SAFE Retirement Plan, employees receive a secure pension at retirement for life that is 100% vested, fully portable and cannot be underfunded,” he said. “Employers and taxpayers receive stable, predictable and affordable pension costs. Underfunding is not possible. The life insurance industry pays the pensions and bears all of the investment risk.”

SAFE plans “will be protected by a robust and multi-faceted state insurance regulatory system built to ensure financial strength and solvency, and backed up by a state-law based consumer safety net,” Hatch added.

But Hank Kim, executive director of the National Conference on Public Employees Retirement Systems, was left scratching his head. “Public pension plans are already self-annuitized,” he said. “To say the private sector would do it more efficiently, I just don’t understand that rationale.”

“At first blush, our feeling is this is a bill looking for a problem, he said, rejecting the claim that public pension systems have gotten worse. “No pension plan has ever gone bankrupt, but there are a slew of private insurance companies that have gone bankrupt,” he said.

Earl Pomeroy, senior counsel at Alston & Bird here, a former congressman from North Dakota and North Dakota Insurance Commissioner, said, “This bill fundamentally doesn’t work.”

With current public pension systems, governments take the risk and “you have permanent entities with which to deal with,” he said, noting 46 states have adopted pension reforms in recent years. But private insurance companies can fail and have failed, he said.

Pomeroy pointed to First Executive Life Insurance Company, the largest insurance company in California, which went bust in April 1991, shocking its policyholders and the financial world, after investing in junk bonds. “There have been a lot more insolvencies of insurance companies over the years,” he said. A 1991 report by the then-General Accounting Office found life insurance company failures hurt many pension plans and retirees.

“I can’t get past my suspicions that this really is about private sector interests in billions of dollars of assets held by public pension funds,” Pomeroy said.

Hatch claimed his bill is not a gift to the life insurance industry, but is rather an opportunity for the industry to help solve a serious problem. He released several letters from groups and companies that he said support his legislation, including the National Association of Insurance Commissioners. A NAIC spokesperson said the group has no position on the bill and simply offered to work with Hatch on it. The bill was lauded by the U.S. Chamber of Commerce and life insurance companies and groups.

Dustin McDonald, director of the Government Finance Officers Association’s federal liaison center, said GFOA will look closely at the bill and other tax reform ideas and how they will affect state and local governments. “While we have not fully evaluated Sen. Hatch’s legislation, an obvious concern may be how governments could lose control over the funds and the important policymaking decisions made by the plans and participating governments and ensuring that defined benefit plans continue in this sector,” he said.

William “Flick” Fornia, president of Denver-based Pension Trustee Advisors, an actuarial consultant to state and local pension plans, said the bill is unworkable. “I don’t think it’s going to work because the capital requirements for insurance companies are much more stringent that the requirements that the states put on themselves for their pension funds. Public pension fund earnings tend to be higher than insurance companies’ [earnings] would be because of their investment flexibility and therefore the costs would go up quite a bit to try to have public employees insured.”

California State Treasurer Bill Lockyer declined to comment on the bill, his press secretary Bill Ainsworth said.

Jeannine Markoe-Raymond, director of federal relations, for the National Association of State Retirement Administrators, said she and other NASRA staff plan to meet with Hatch’s staff later this week and would rather not comment on the bill until after that meeting.

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