Public Pension Reform: State Lawmakers Urged To Look At Hybrid Plans

TAMPA -- At the annual fall forum of the National Conference of State Legislatures, pension reform advocates briefed the nation's state legislators on hybrid pension plans on Thursday, saying there is "nothing more dangerous" to state fiscal health on legislative agendas today.

Lawmakers must address the pension reform issue in the face of rising pension costs, declining pension reserve funds and the current state of the nation's financial markets, they argued.

"The unfunded (pension) liability is somewhere between $1.5 and $3 trillion," said former Pennsylvania Lt. Gov. Mark Singel (D) about the total liability among the 50 states.

Changing models of pension reform have been a top issue in several states recently, including last month's passage of a new hybrid model of a defined benefit and defined contribution plan in Rhode Island. Pushed by Gov. Lincoln Chaffee (I) and state Treasurer Gina Raimondo (D), the plan was adopted amid protests from public employee unions.

Meanwhile, in Utah, a new hybrid plan came into effect last year after pension fund projections forecast a possible bankruptcy of the fund within 20 years. State Sen. Daniel Liljenquist (R-Bountiful), the local legislature's retirement committee chairman and an author of the measure, said the new plan moved state employees to a 401(k) like retirement system, with a defined contribution put into place for workers. He noted it also moved to reduce the state contribution going forward and change cost of living adjustments, which is a part of the plan adopted in Rhode Island as well.

According to Singel, other states need to join the trend of changing pension funds. "People have stepped up and taken dramatic statesman like actions to save this," he told the bipartisan crowd of several hundred lawmakers and staffers. "You will be forced to either raise taxes or cut services."

Keith Brainard from the National Association of State Retirement Administrators, responded to Singel and Liljenquist saying that change to a plan similar to a 401(k) is not the only thing that could help states, but rather they should look at hybrid plans that work best for individual local needs.

Brainard told lawmakers that five things need to be in place to make a state retirement plan workable. These include mandatory participation from employees, contributions from both employees and employers, professional asset management for investments, lifetime benefit guarantees and adequate benefits. Both Liljenquist and Singel noted they agreed with Brainard on issues such as mandatory participation.

In the light of strong opposition to pension reforms from public employee unions -- including protests in Wisconsin, Rhode Island and New Jersey, and the rejection of Ohio's collective bargaining reform bill -- Singel urged lawmakers to look at pension reform as a positive for public employees.

"I view this as a pro-teacher initiative and a pro-worker initiative," he said. "You are keeping teachers in the classroom."