New state employees would be able to utilize a portable 401(k)-style retirement plan under legislation passed in the state Senate on Wednesday. Senate Bill 2120 will move state employees hired after Nov. 1, 2015 away from the traditional defined benefit to a defined contribution plan, similar to the private sector.
The change is only for new state employees, and will keep the promises made to current workers already in the state's pension system. 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.
"Our state needs to be able to compete for the 21st Century global workforce. This legislation will help make state employment more attractive to the next generation of workers," said Senate President Pro Tempore Brian Bingman. “Our state's long-term fiscal stability is dependent on making this responsible change, like many other states have done in recent years."
The legislation requires an employee to contribute a minimum of three percent of their salary up to seven percent, which will then be matched by their employer in a 401 (k)-style plan. Employees designated "Hazardous Duty" are exempted from the bill, including fire and police. Teachers are also not included in the legislation. The law will also apply to officials elected or appointed after November 1, 2015.
"Change is always hard, but we have worked with our state employees on this plan for several years and we feel like this is the best way to attract new workers to the state while protecting the current pension systems for the workers who will depend on them in retirement," said Sen. Rick Brinkley, author of the bill and chairman of the Senate Pensions Committee. “This legislation makes us more competitive while also further reducing our pension liability and making the systems more financially sound over the long term.”
The actuary for the Oklahoma Public Employees Retirement System has said this change “would be sufficient to pay off the shortfall over the remaining amortization period of 14 years under the current actuarial assumptions,” further shoring up the system. The legislation passed the Senate with a vote of 34-11 and now moves to the House for further consideration.