The Enid News and Eagle, Enid, OK

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March 11, 2014

State House OKs change in retirement plan

OKLAHOMA CITY — Many new state workers would have 401(k)-style retirement plans rather than traditional public employee pension plans under a measure the Oklahoma House passed on Tuesday.

The House approved the measure 57-42 and sent it to the state Senate, which has already passed similar legislation. House members also voted 90-0 for a bill that would give many state workers their first pay raise in seven years and revamp state worker compensation. Legislative leaders have said the measure is intertwined with the pension overhaul bill.

Under the bill by Rep. Randy McDaniel, R-Edmond, state workers hired after Nov. 1, 2015, who are part of the Oklahoma Public Employee Retirement System would be shifted from the current defined-benefit pension plan to the 401(k)-style defined-contribution plan.

New state employees would contribute at least 3 percent of their salaries for retirement and the state would match employee contributions up to 7 percent. Current state employees would remain under the old system and the bill would not affect current retirees or public safety employees like police officers and firefighters.

Supporters say the bill will help reduce the estimated $11.6 billion in unfunded liability in the state’s public pension systems and allow employees to take their retirement plans with them if they leave state service for the private sector.

“We are adding mobility and portability,” McDaniel said.  “This is talking about freedom, freedom for the individual.”

McDaniel said the state will allocate about $820 million this year to address unfunded pension debt. He said his bill will free millions of dollars that could be used for higher salaries for state employees, education and transportation.

“Oklahoma faces a pension crisis,” said House Speaker Jeff Hickman, R-Fairview. “Service and hard work should be compensated, and our state employees and taxpayers deserve a system that is modern, efficient and sustainable.”

But opponents expressed concern that eliminating the traditional pension system will make saving for retirement more uncertain for state workers.

“This argument boils down to risk,” said Rep. James Lockhart, D-Heavener. He said employees who invest their retirement savings in stocks could have their retirement wiped out in a stock market crash.

“How much risk are we willing to expose our state employees to?” Lockhart said. “Our job should be to lift people out of poverty and not place them in it.”

Rep. Kevin Matthews, D-Tulsa, characterized defined contribution plans as “casino-type retirement” that is analogous to gambling.

“This is a retirement system, not an investment,” said Rep. Richard Morrissette, D-Oklahoma City.

Rep. Mike Brown, D-Tahlequah, said proposals to replace traditional retirement plans with 401(k)-style plans are being supported by private fund managers who stand to profit from the new system.

“There’s profits to be made out there,” Brown said. “The employees will profit in their pension system if we leave it alone.”

The state worker salary bill would set aside 3 percent of the previous fiscal year’s payroll costs for salary adjustments each year and give the Office of Management Enterprise Services authority to set pay structures and determine if targeted adjustments are needed.

Its author, Rep. Leslie Osborn, R-Mustang, said it will provide initial raises to the state’s lowest-paid workers, including corrections, human services and public safety workers, at a cost of about $40 million.

State worker salaries are about 20 percent below comparable jobs in the competitive labor market. The measure would boost salaries to 90 percent of private-sector pay over four years.

Oklahoma Public Employees Association Executive Director Sterling Zearley said he is excited that state worker pay has become a priority in the House.

“The Oklahoma Legislature must improve state employee salaries this year if it wants the people of Oklahoma to continue to receive quality services from our state employees,” Zearley said.

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