If signed into law, new employees hired from Nov. 1, 2015 within the Oklahoma Public Employee Retirement System (OPERS) will use the contribution plan, basically a 401(k). Employees working before this date will continue on the existing definedbenefit pension.
Teachers, firefighters, law enforcement officers and judges aren’t included in House Bill 2630, authored by Rep. Randy McDaniel, R-Oklahoma City.
The defined-benefit option sets a retirement income for life based on the state employee’s years of service and income, as long as they work at least eight years to qualify.
A contribution plan provides retirement income based on how much the employee and employer contribute over time. HB 2630 would require future state employees to contribute 3 percent to retirement, and they could be eligible for up to a 7 percent match from the state.
Proponents believe contribution-style plans are more appropriate for today’s mobile workforce.
“The retirement design proposal is intended to provide greater control and freedom for future workers,” said McDaniel, chairman of the House Pension Oversight Committee.
Jonathan Small, vice president for policy of the conservative-leaning Oklahoma Council of Public
Affairs, adds that in the last decade, 50 percent of state employees
that started with the state have left, which he said penalizes those who
are only part of a defined benefit plan for a short period.
But Rep. Scott Inman, House Democrat leader of Del City, believes the state needs defined benefit plans to retain quality employees.
“If Oklahoma wants a state employee base that is educated and committed to the cause of what their agency does, we need to ensure benefit packages that incentivize them to stay in the position,” Inman said. “If people are moving into the private sector sooner and faster, that will cost Oklahoma more money … to get a new employee up to speed, making government less efficient and more expensive.”
Inman also said low-income state employees won’t contribute the full 7 percent to receive the maximum match from the state, which will lead them on a path to “retiring into poverty and social welfare.”
Unlike the Democratic leader’s position, with this bill, supporters believe it will “free up hundreds of millions of dollars over time that could be used for higher salaries for state employees, education and transportation,” according to a statement from the House of Representatives.
“The high costs associated with paying for the unfunded promises of the past impact all other priorities of the state,” McDaniel said.
The unfunded liability the representative mentions is $11 billion in state pension debt. Bill advocates say it will not only help increase state salaries but also pay down this debt.
Opponents, on the other hand, say the current OPERS system will reach full funding in a little more than a decade — before the plan proposed by McDaniel is fiscally intact.
“The $11 billion shortfall happened because the legislatures haven’t made it a priority to pay the money back,” Inman said. “If there’s a shortfall, then why did they pass a bill to cut $200 million in taxes? If you shelve tax cut proposals when we have many more needs that should be met, then you can grow out of a recession and take the revenue for needed services.”
In February, state employees against the pension proposal rallied in the Capitol to share their concerns. They included teachers and firefighters, which aren’t part of HB 2630. However, Inman said he thinks they are next.
“They went after OPERS first because they aren’t as organized as teachers, firefighters and officers,” Inman said. “They’ll first conquer OPERS and then take on teachers and firefighters in a nonelection year.”
McDaniel hasn’t spoken in favor of moving in the same direction with teachers, firefighters and police officers. Small said while OCPA doesn’t recommend firefighters and officers be removed from defined benefit, he does think future teachers, as non-hazard employees, could move in that direction.
“Once we have more time to look at shoring up the dedicated revenue for teachers’ retirement systems, we do think it makes sense, but only after policymakers and citizens see the plan is working well with OPERS,” Small said. “Any change would protect the current and retired teachers’ plans and only change future employees.”
Small, who is traveling around Oklahoma to speak about the proposal, said he has received positive responses from state employees who believe the bill is the best choice going forward.
Jim Curry, president of the Oklahoma State AFL-CIO, said he hasn’t seen state employees asking for a 401(k) over the defined benefit.
