New state employees who participate in the Oklahoma Public Employees Retirement System would be switched to a 401(k)-style defined contribution plan under a measure approved Tuesday by the state House of Representatives.
House Bill 2630 passed the House 58-33. It now will go to the state Senate.
House author Randy McDaniel, R-Edmond, debated in favor of the measure, saying “this plan offers great investment choices, low expenses, and a matching schedule competitive with the largest and most successful companies.”
McDaniel also argued it is good for taxpayers.
“The state has over $11 billion in unfunded liabilities,” he said. “We spent $823 million last year to service those debts. We spent a like amount to pay for the new benefits. The costs are increasing, and the costs are crowding out other priorities. The status quo is not working for those who support better pay, fixing our infrastructure and less government debt.”
State Rep. James Lockhart, D-Heavener, was among numerous House members who argued against the bill, contending it would mean less money for most state employees upon retirement.
“When we go to this defined contribution (plan), if the stock market crashes, what happens to these thousands of state employees who are on a defined contribution retirement? I’ll tell you what’s going to happen. They’re going to line up down at the DHS office in Poteau. They’re going to line up for welfare.”
The proposed defined contribution system would enable new workers to contribute between 3 and 7 percent of their salaries into the retirement system and receive a dollar-for-dollar match from the state. Participants would become 20 percent vested in the retirement system after one year, and that percentage would increase annually until they become completely vested after five years.
Employees who leave their jobs after one year or more would be entitled to not only get their own contributions back, but also a percentage or all of the state’s contribution, plus investment earnings, depending on how long they worked for the state.
New corrections employees and district attorneys and their assistants would be exempt from converting to the new system. They would join current state employees in remaining under the old defined benefit plan.
McDaniel said new state employees would have choices in how they invest their retirement funds if the plan is approved. They could choose investments tied to the stock market, or they could select annuities if they don’t like risk.
“This bill helps Oklahoma,” McDaniel said. “New workers want better pay. They’re not waiting around for the gold watch and retirement benefits based on longevity. ... Future employees will be offered greater opportunities to create wealth, to take control over their retirement plans and to have more occupational freedom.”
Current state employees who participate in the Oklahoma Public Employees Retirement System would remain under the old defined benefit system, which promises them a set amount based on their salaries and years of service.
State legislative leaders tied acceptance of the pension plan for new state employees to the Republican leaders’ willingness to present an employee pay raise bill to be voted on later.