As we approach the year’s conclusion and gear up for the upcoming legislative session, let’s look at the evolving pension landscape across several states. Today, we shed light on the noteworthy shifts in pension policies, pinpoint where we anticipate significant debates in the approaching session, and highlight states that have proactively initiated enhancements to retirement benefits for public workers.
Alaska
In 2005, the Alaska state actuary made faulty assumptions about the Public Employee Retirement System (PERS) and the Teachers’ Retirement System (TRS), triggering state lawmakers to close the plans to future hires. Instead of a pension, public employees are only offered a defined-contribution 401(k) retirement plan and are not eligible to receive Social Security. Since the closure, Alaska’s state departments, school districts, and municipalities have struggled to recruit and retain employees, disrupting the delivery of public services across the state.
In 2023, Senate Bill 88 was introduced to provide a pension component to all future public employees with a pension component. Next year, this bill must pass out of the Senate Finance Committee and move into the House of Representatives before it can be signed into law. The Alaska Public Pension Coalition has worked diligently to educate lawmakers and the public about the risks of continuing to operate critical state departments with high vacancy rates and the benefit of offering secure, defined benefit pensions to public employees.
North Dakota
In a groundbreaking move during this year’s legislative session, North Dakota lawmakers passed HB 1040, a bill that will drastically alter the future of the state’s public workforce. The legislation, signed into law by the governor, marks a pivotal moment as North Dakota becomes one of the few states in the nation to eliminate a defined-benefit pension system for state employees, replacing it with a defined-contribution 401(k) retirement plan.
The controversial bill, estimated at $5 billion, has set a new record as the most expensive in the state’s history. Advocated for by the Reason Foundation and TIAA, a defined-contribution plan operator, the move has sparked concern over hidden agendas. NPPC and our state coalition fought vigorously against the legislation, recognizing the potential detrimental impact on the state’s recruitment and retention of public employees.
The consequences of this shift, seen in states like Alaska, where pension system closures have adversely affected essential services, loom large over North Dakota. This is particularly concerning given the nationwide shortage of public employees, intensifying the challenges faced by the state.
As we prepare for sessions after the new year, we urge states to be wary of the Reason Foundation’s influence and its anti-pension ideologies. North Dakota serves as a cautionary tale for other states. The implications of HB 1040 will undoubtedly shape the discourse around public employee benefits and the state’s commitment to its essential workforce.
Oklahoma
In 2014, lawmakers in Oklahoma significantly changed the Oklahoma Public Employees Retirement System (OPERS) when they implemented HB 2630, which put all public employees hired after November 1, 2015, except for teachers and those in hazardous-duty positions, in a defined-contribution 401(k) retirement plan.. Since the closure of the defined-benefit pension plan, the State of Oklahoma has faced a significant recruitment and retention crisis in its public employment ranks. Next year, pension advocates in Oklahoma will again set their sights on reopening OPERS to alleviate their growing worker retention problems.
Places That Have Reopened Or Looking to Re-open Defined Benefit Pension Systems
Trumbull– (Connecticut) In a unanimous decision, the Trumbull Town Council has taken a crucial step to tackle police officer retention issues by reinstating pensions for the police department. The move aims to reduce the high turnover the department has been experiencing, bridging the gap in benefits compared to other departments. The police department has been without pensions since July 1, 2014, when the administration shifted to a 401(k) defined contribution plan for newly hired officers, lacking the retirement benefit guarantees of traditional pensions.
Memphis– (Tennessee) Effective in July of this year, police officers, firefighters, and dispatchers were given the option to participate in a defined-benefit pension (DB) plan after the city unveiled last year a significant initiative to address its public safety workforce’s needs by reopening its DB plan to employees hired since July 1, 2016.
The decision marked a shift from the previous closure of the $2.4 billion Memphis City Retirement System’s defined benefit plan to new hires after June 30, 2016. Employees hired after that date were automatically enrolled in a hybrid plan. Approximately 1,000 public safety professionals will now be eligible to choose the 1978 pension plan, allowing them to contribute up to 8% of their salary with matching contributions from the city, no less than 6% of their salary.
As the year concludes, we witness many legislative shifts across states. The complex interplay between fiscal responsibility and public employee welfare unfolds from Alaska’s struggles and North Dakota’s controversial move to Oklahoma’s challenges. Amidst uncertainties, beacons of change emerge in places like Trumbull and Memphis, where defined benefits pensions are making a return. As we usher in a new year, the intricate future of pensions remains a compelling narrative shaped by legislative decisions and the pursuit of stability for our invaluable public workforce.
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