Senate Bill 14 (SB 14), authored by Senate Retirement Committee Chair Barrow Peacock, sets forth a LASERS proposed plan for legislative consideration. It would apply to those rank-and-file members hired on or after January 1, 2020. Rank-and-file members hired on or after July 1, 2006, would be given a window to join the new plan for prospective service. Benefits for current employees would otherwise not be impacted.
The current plan available to LASERS new rank-and-file members is very different from the one that was in place for members hired before July 1, 2006. Our research shows that the current plan will not provide retirement security for the vast majority of these new hires. LASERS actuary has concluded that only five percent of members in our current rank-and-file plan for new hires will actually stay in the system long enough to receive an unreduced retirement benefit. In fact, we expect that 70 percent will leave state service before retirement eligibility and receive only a refund of their employee contributions.
Employers are finding it very typical for this new generation to try different jobs rather than stay with the same employer for their entire career. This realization caused LASERS to explore whether a new plan could be crafted to better meet the needs of this new generation, while at the same time reducing the risk of future unfunded accrued liability (UAL). Our research led to the proposal for a retirement plan that combines the elements of both defined benefit (our current plan) and defined contribution (like a 401(k)) plans.
By reducing the risk of creating future unfunded accrued liability, SB 14 is an important further step in pension reform. It would provide a secure base benefit for employees with the defined benefit component. The defined contribution component would add a level of portability to an employee’s benefit that does not currently exist. For details on the plan, view the summary sheet.
If passed, the new proposed LASERS plan would provide retirement security for a new generation of retirees. It will have no negative impact on the sustainability of our System. On the contrary, the reduction of risk of future UAL will be beneficial to both the System and the State.