The State Post-Employment Benefits Commission has published its final report on the state’s underfunded retiree benefit programs. Although it made few specific recommendations, the commission suggested several options, including increasing employee contributions, raising the retirement age, discouraging early retirements, and stipulating that a portion of any future state surpluses be used to fund retirement benefits.
The commission failed to agree on the value of replacing the state’s defined benefit (pension) plan with a defined contribution (401K) plan. Those in favor of changing to a defined contribution plan worried that the state’s current problems would only get worse, while those opposed to a change believed that 401k plans would cost the state more money, provide less security to retirees, and fail to address current funding problems.
However, the commission did advise against issuing pension obligation bonds because of their impact on the state’s debt level, financial flexibility, and credit rating. It also advised against any future retirement incentive programs that failed to include a multi-year actuarial analysis and a method for funding any actuarial losses. The commission also stressed that any savings realized by its suggestions had to be reinvested to reduce the retirement plans’ unfunded liabilities.
