Efforts to shore up Oklahoma's pension system, which a couple years ago was among the most underfunded in the country, will continue this session with a proposal to give some new state employees the option of a defined contribution plan instead of the traditional plan.
Rep. Randy McDaniel, chairman of the House of Representatives Pension Oversight Committee, said Wednesday he will file a measure that would give that option to most state and county workers as well as some city employees whose pensions would be administered by the Oklahoma Public Employees Retirement System.
About 41,000 employees now pay into the retirement system to receive monthly pensions through a defined benefits plan based on a formula that takes into account their salary and duration of government work. Workers have the option to also take part in a defined contributions plan, similar to a 401 (k) plan. The system also has about 32,000 retired members.
Under McDaniel's proposal, new employees under the Oklahoma Public Employees Retirement System would have the option to take part in a defined contribution plan, which would provide employees with a payout when they retire based on the amount of money contributed and investment gains or losses.
New employees would have 90 days to make the decision on the pension option, said McDaniel, R-Edmond. Their decision would be irrevocable.
“They are not forced to participate,” he said. “We're going to give every employee a fair chance to look at both programs.”
Current state employees would remain with the defined benefit system.
McDaniel, who has about 20 years' experience in the financial services industry, said he didn't know how many employees would pick the defined contribution plan over the traditional state pension plan.
Tom Spencer, executive director of the Oklahoma Public Employees Retirement System, said he has talked with McDaniel about some concerns he has with the proposal.
“Anytime you have a situation where you're giving a choice to someone that's irrevocable for the rest of their state career, you have to make darn sure that you've communicated all the relevant information — the pros and cons — of each choice,” he said.
“Currently you don't have that choice. While that may not be good for some people, there's a lot of certainty to that and everybody's in the same system.”
Spencer said Florida tried a similar proposal about 10 years ago and few, about 5 percent, chose the defined contribution plan.
“I have no doubt that some people will pick DC (defined contribution), but a lot more would choose to stay in the pension plan especially if they plan a career in state government,” he said.
Spencer said his system would be able administratively to offer the defined contribution option because it already offers a voluntary one.