For The Norman Transcript
The Senate Pensions Committee today approved legislation that will move state employees hired after Nov. 1, 2015, away from the traditional defined benefit to a defined contribution plan.
This change is only for new state employees and will keep the promises made to current workers. Employees designated “Hazardous Duty” are exempted from the bill, including fire and police. Teachers are not included this year.
In addition to state employees, county employees are also on the state retirement plan.
The defined contribution plan will make Oklahoma better able to attract the next generation of state employees who value portability when it comes to their retirement plans, while helping lower Oklahoma’s unfunded pension liability over time, according to the press release issued today.
“We always talk about the importance of running government like a business. This is a transition that much of the private sector made over a decade ago,” said Senate President Pro Tempore Brian Bingman. “Kicking the can down the road is no longer an option.”
Senate Bill 2120 requires an employee to contribute a minimum of 3 percent of their salary up to 7 percent, which will then be matched by their employer in a 401 (k)-style plan. The law will apply to officials elected or appointed after Nov. 1, 2015.
“We have made great strides in lowering our state’s pension liability, but more must be done,” said Sen. Rick Brinkley, author of the bill and chairman of the Senate Pensions Committee. “Let me be very clear — this piece of legislation does not affect anyone currently employed by the state. We believe that for us to continue to attract the best and the brightest, we must provide the next generation of state employees a retirement system that is reflective of their needs, allows an employee to take their retirement plan with them if they choose to leave and prevents politicians and bureaucrats from harming their retirement. We have a responsibility to our grandchildren to ensure they are not on the hook for this liability years from now.”
Currently, employees on the state retirement plan continued to recieve the same benefits regardless of what happens in the economy. When the state pension fund lost money during the recession, benefits remained the same, creating a future unfunded liability.
Most businesses and many municipalities — including Norman — shifted away from defined benefit plans years ago.
“The state is obligated to pay the difference in what the fund makes and what it takes to make the fund whole,” Brinkley said. “Going forward we have to do what is fically responsible for the state of Oklahoma.”
On the positive side, the new plan is more portable and fits the current emerging business models.
“With this, employees can transfer that retirement to the next job and keep it growing,” Brinkley said. “They are vested at a rate of 20 percent a year so they are vested at five years.”
The legislation passed the Senate Pensions Committee today with a vote of 5-2 and now moves to the full Senate for further consideration.