Unless state leadership is willing to reduce benefits to current and future Oklahoma Teachers Retirement System (OTRS) retirees, the political wisdom of creating a defined contribution system for new Oklahoma teachers is a financially risky strategy. Information contained in the system's 2013 actuarial report best illustrates the problem. Of the nearly 162,000 members in the OTRS, more than 54,000 are already retired, costing the system more than $1 billion a year in retirement benefits.
There are nearly 38,000 active teachers age 50 or older who'll likely retire within the next 10 years. Because of higher average compensation and previous system changes, these new retirees, along with the current retirees, will double annual costs of the system in the next 10 years. The OTRS pays retirement benefits from active member and state contributions, plus realized earnings. System net cash revenues ending fiscal year 2013 were $1.321 billion, of which member and taxpayer contributions represented slightly more than $991 million and realized market cash earnings represented $330 million.
If sufficient replacement state contributions aren't made when the Legislature creates a defined contribution system for new hires, OTRS contributions will diminish, placing greater strain on system earnings and its fragile asset base as the age 50-plus members retire. This strain will quickly deplete OTRS assets. It's good to create a competing retirement system when the old system is financially healthy. It's a guaranteed future disaster when the old system is financially weak. Another approach is needed.
Jim Harris, Oklahoma City