Leaders show support
The idea of consolidating the pension boards has been floated at the state Capitol in the past 30 years, but this is the first time two key statewide elected officials have publicly pushed the concept.
A House of Representatives committee earlier this week passed two bills that dealt with the state's pension system but contained no substantive language, called shell bills. It's believed the bills could be used to contain Fallin's two proposals. The author of both measures is House Speaker T.W. Shannon, R-Lawton.
State employees now pay into the retirement system to receive monthly pensions through a defined benefit plan based on a formula that takes into account their salary and duration of government work.
Under Fallin's proposal, new employees would take part in a defined contribution plan similar to a 401(k) plan, which would provide employees with a payout when they retire based on the amount of money contributed and investment gains or losses.
“To meet the needs of a modern workforce and provide cost certainty to state government outlays, we must catch up with the private sector and many other states by moving toward a 401(k)-style retirement plan that provides portability, flexibility and choice,” Fallin said. “When Oklahoma's pension systems were created, it was common for a worker to spend 25 to 30 years in the public sector. Today, the average public employee exits for the private sector much sooner.”
Unfunded liability dips
Two years ago, the state's pension system had a $16.5 billion unfunded liability, making it among the worst in the country. New laws passed in 2011 reduced the unfunded liability by nearly one third or about $5 billion.
Most of the savings came from a measure that requires the Legislature to fully fund cost-of-living adjustment increases for those on the state's pension system. Sluggish market returns were key factors in increasing the liability by $1 billion last year, putting the unfunded liability at $11.5 billion.