Retirement System Changes Under Study
Post date: Feb 23, 2011 3:48:53 AM
On the pension front, various House and Senate committees and state pension panels are still meeting to consider possible changes to teacher retirement.
The House Economic Development, Tourism Financial Services Committee recently approved a bill requiring that a pension plan be at least 80 percent funded before a cost-of-living adjustment could be considered for retirees. Since the teacher retirement system is only 48 percent funded and has a $10.4 billion unfunded liability, this would effectively end cost-of-living adjustments for all retired teachers. The same committee approved legislation requiring that all cost-of-living adjustments have a funding source.
News report on recent meeting of Oklahoma State Pension Commission
It is still too early to tell what sort of pension changes, if any, will receive the blessings of the entire house or senate. However, Senator Mike Mazzei of Tulsa is chairing a select committee assigned to study the problem, and he clearly favors a transition in all or in part to a defined contribution plan. This is not in the best interest of teachers since a defined contribution plan operates more like a 401(k) or 403(b) plan and thus puts the retirement savings and consequent withdrawals at risk when there are inevitable market downturns. The current defined benefit system shields teachers from such risks. Studies have also indicated that restructuring the existing defined benefit systems into defined contribution systems would create large fiscal liabilities for the state since the number of workers paying for existing defined benefits would steadily decline.
Senator John Ford of Bartlesville is also serving on the select committee. BEA Chief Negotiator Granger Meador shared his concerns about defined contribution systems with him in a personal email and pointed out possible changes to the existing defined benefit system, proposed by former state treasurer Meacham, as ways to help reduce the unfunded liability.