Legislators propose several measures to fix pension systems

2013-01-03T00:00:00Z 2013-01-03T00:07:13Z Legislators propose several measures to fix pension systemsBy CHARLES S. JOHNSON Gazette State Bureau The Billings Gazette
January 03, 2013 12:00 am  • 

HELENA — Here are some of the proposed ideas to address Montana’s pension systems besides one suggested by departing Gov. Brian Schweitzer.

— Require new hires under the Public Employee Retirement System to be in the defined contribution plan.

“What we’re doing now is using the contributions from existing employees to cover the shortfall in the current system, which is basically paying the current retirees,” said Sen. Dave Lewis, R-Helena. “New employees will cut their way loose from this sinking ship.”

— Deal with the pension benefits and money coming in every year.

Sen. Jim Keane, D-Butte, who is a longtime union leader, said the state should address the issue to make the pension funds actuarially sound every year, just as union pension funds must do.

“The state’s problem is we don’t do anything right away,” he said. “We could look at something that forces the executive branch or legislative branch to deal with it right up front. We could fund additional money or deal with the benefits going forward.”

— Amend the Montana Constitution to require the state to spend the money to shore up the pension funds to make them actuarially sound.

“We’re already obligated to pay that as a state, and we need to pay that bill before the bill gets worse and worse, like a credit card bill,” said Rep. Kirk Wagoner, R-Montana City, “The constitutional amendment would be if you don’t fix it, you cannot spend more money out of the general fund.”

— Switch to a cash-balance plan.

Sen. Ron Arthun, R-Wilsall, said he is proposing what would be hybrid plan that provides elements of a defined benefit plan and a defined contribution plan. It would guarantee a 4.5 percent return on pension investment, no matter what the investment markets do. An employee would contribute a certain percentage, and the employer would match it.

After 10 years, people could roll over this money to an Individual Retirement Plan if they no longer work for the state. Once they turn 60, they would receive an annuity. They would receive what they put in, what the public employer put in, plus the 4.5 percent return.

“I think it’s a common sense plan, and it meets people in the middle,” Arthun said. “They still have a guaranteed rate of return.”

Rep. Rob Cook, R-Conrad, wants a cash balance with a 3 percent guaranteed rate of return to public employees when they retire.

“I think the perspective is the current defined benefits system places too much risk on the private sector taxpayer,” he said. “We in essence accept all the risk. It doesn’t mean what we follow it with has to be as heinous as the defined contributions system.”

Cook said he likes the cash balance system because “it really matches the flavor of today’s work force,” adding: “Nobody goes to work for anybody for 30 years. They walk away after eight years and get nothing.”

— Increase contributions by employees by 1 percent, have PERS and Teachers' Retirement System funds match the increase, use some coal-tax trust fund money and state surplus money to help shore up the funds. Then new hires would go on a defined contribution plan.

“The bill would take care of our obligations on pensions for active and retired people, and new people would be under defined contributions,” said Rep. Keith Regier, R-Kalispell.

— Increase pension contributions by employers by 0.25 percent in each of the next four years for the pension funds for public employees, highway patrol, game wardens and sheriffs.

This is the proposal by the Public Employees’ Retirement Administration board, said Roxanne Minnehan, its executive director.

She said the board didn’t recommend increases in employees’ contributions because of increases passed in 2011 as part of a number of changes.

“All those things don’t have a huge impact right now, but over time they will,” she said.

— Raise the contributions by new and current education professionals under the Teachers' Retirement System and make other changes.

Dave Senn, TRS executive director, said the TRS board proposed raising the contribution rate for new and current educational professionals, with triggers to reduce it as the funding becomes more actuarially sound.

There would be changes in calculating pensions for new employees after mid-2013.

“For new members, they’re going to have to pay more, work longer and receive less,” he said. “We think it’s a retirement package that is fair, sustainable and affordable, and it’s competitive with where the states are going nationally with new hires.”

In addition, $14.7 million in excess retirement reserves from school districts would be transferred to TRS as a one-time contribution. The state would provide 80 percent of the districts’ transportation share in the fall to offset any cash flow problems. The state would make an annual $25 million payment to TRS from state land trust revenues.

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