In a DC plan, costs to employers remain consistent as a percentage of salary year in and year out, and employees know immediately if their employer doesn't make their pension contribution. With professional and prudent investment guidance, employees are able to guarantee themselves a secure retirement.
Merely an optional DC plan is inadequate. It would not put an end to the havoc wreaked on state finances by the existing retirement options. A “cash balance” plan would maintain the negative portions of the existing system while offering only a fictional nod to a DC system. In such an arrangement, a set benefit remains legally guaranteed and taxpayers are still left to foot the bill.
With a real chance at pension reform in the 2014 legislative session, Oklahoma's leaders need to prepare for meaningful pension reform. Without immediately addressing the unfunded liability and the question of how to offer a secure retirement benefit for future employees, the state will be left scrambling in future legislative sessions for the resources to pay existing obligations alone.
Williams is president of State Budget Solutions, a national organization dedicated to fiscal responsibility and pension reform.