Proposed pension reform framework*
General provisions affecting school districts:
• Full payment of the actuarially required contribution with a new funding formula that will plow “hundreds of millions” more into all plans to shrink the unfunded liability more quickly.
• Bill will not go into effect until July 1, 2018.
What is not in the plan:
• No clawbacks of already provided cost-of-living increases for retirees.
• No increase to retirement age.
• No enrollment of new teachers in Social Security.
Teachers’ Retirement System specifics:
• Current teachers stay in the current defined benefit plan until they reach retirement eligibility – 27 years or age 60. Those who reach that threshold on July 1, 2018 may opt to continue in the current defined benefit plan for an additional three years, but otherwise, their TRS benefit would be frozen at that point and they would be shifted into a defined contribution (DC) plan similar to a 401(k) plan like new hires.
• New teachers and those who hit 27 years after July 1, 2018 (with exception noted above) will be enrolled in a DC plan.
• Current teachers with less than five years of service in the current plan have the option of transferring to the DC plan.
• DC plan for current teachers who reach full eligibility by July 1, 2018 calls for an employee contribution of 10 percent and a state contribution of 8 percent.
• DC plan for new teachers and those who hit full eligibility after July 1, 2018 calls for employee contribution of 9 percent with the option for an additional 3 percent; and an employer contribution of 6 percent, with the state picking up 4 percent of that and the local district paying 2 percent.
• The “high three” for benefit calculation is retained until June 30, 2023; after that, it becomes “high five.”
• Retiring teachers can use their accumulated sick leave for benefit calculation until July 1, 2023. After that, it’s gone.
• Cost of living increases: no clawback for current retirees, but future COLAs for current retirees will be suspended for five years. COLAs for future retirees will not begin until five years into retirement.
• Employees must contribute an additional 3 percent of their salary to fund the retiree health insurance program.
• Future retirees must suspend their pensions if taking a full-time job in the “public sector” for the duration of that employment.
County Employees Retirement System specifics:
• All new hires will enroll in a DC plan. See chart below for details.
• Tier 1 employees will stay in the current defined benefit program until full retirement eligibility at 27 years of service or age 65. Tier 2 employees will stay in the current defined benefit program until their full retirement eligibility per the “rule of 87” or age 65. Both groups will move into a DC plan after reaching the full eligibility threshold.
• Tier 3 employees will immediately roll over their current hybrid plan into the new DC plan.
• Employees must contribute an additional 3 percent of their salary to fund the retiree health insurance program.
• Accrued sick leave balance is capped on June 30, 2018. After that, sick leave credit will not be used to determine retirement eligibility.
• Comp time payments will count toward benefit calculation only for those retiring on or before July 1, 2023.
• “High five” is required to be a full 60 months of service.
• Future retirees must suspend their pensions if taking a full-time job in the “public sector” for the duration of that employment.
*As reflected in the summary document released Oct. 18 by the governor and GOP legislative leaders