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Floodgates: States in Overdrive on Retirement Legislation

Since January, new state retirement plan bills have poured into state legislatures around the country, some promising opportunity and some threatening confusion or worse for state plan participants. Obviously not every piece of legislation succeeds, but bills that die in one session often re-emerge later if there’s enough political appetite. It’s important for you and your business to know what’s at stake where you live.

Michigan House Bill 4338 saw a hearing in the House Committee on Financial Liability Reform last week and the committee will decide its fate on March 16. The bill would open the defined contribution component of the state’s Pension Plus plan for public school employees to additional vendors beyond the default provider, giving participants access to more investment options and local advisors. NTSA testified in support of the bill and the outlook is good for advancement.

Louisiana’s unfolding budget crisis has prompted legislation proposing a hybrid plan that would steer state employees, including educators, to a DC plan account with one to three provider options. House Bills 65 and 66 would also set eligibility criteria for those potential providers around whether they do big business in other states, ensuring public school employees would be separated from their trusted local advisors. Those bills are with the House Retirement Committee now.

Washington Senate Bill 5435 is now on Gov.Jay Inslee’s (D) desk. It intends to expand participation in the state’s deferred compensation program by establishing an automatic enrollment feature for new employees. The original bill would have had the effect of eliminating existing teacher-advisor relationships statewide, but an amendment letting public schools opt in instead of having to opt out made it into the final bill and will become the law if Inslee signs it. That could be a big “if.” Recent budget drama in Washington led Inslee to veto an unprecedented 27 bills all at once in order to get the legislature to come back to Olympia and hash out a budget.

Pennsylvania has seen a number of legislative attempts since last summer to address the nation’s second-most underfunded pension, but those efforts have all been tethered to a heated budget bill stalemate. Most of the pension bills that have come and gone during that arduous process have included NTSA-supported efforts to preserve local 403(b) choice, but a final compromise is still forthcoming this spring.

Virginia House Bill 665, which barreled through the Assembly, is a pet project of retiring Speaker William Howell (R). The bill seeks to create a “Commission on Employee Retirement Security and Pension Reform,” which would spend the next five years weighing potentially sweeping changes to the Commonwealth’s state and local employees’ retirement plans. It’s expected to pass and will probably get Gov. Terry McAuliffe (D) signature.

Legislation to close South Carolina’s retirement systems to new employees and funnel them into a new DC plan was introduced and referred to the House Ways and Means Committee in January but has yet to move. The bill would require the state to choose at least four companies to service the plan.

Vermont House Bill 772 would establish a hybrid retirement plan that would be mandatory for new public school employees and optional for existing ones, with the minimum employee contribution rate set at five percent of compensation.

An apparent placeholder bill awaiting additional detail is in Connecticut’s Joint Appropriations Committee. There are ten notable words in the bill so far: “Transition such employees and officials to a defined contribution plan.” What remains to be seen is how that goal is accomplished.

Multiple bills intending to address Illinois’ pension crises have already been introduced this session. Senate Bill 3276 (and its House companion) would allow local governments to provide alternate plans “in lieu of or in addition to the existing” state plan, and those alternative plans could include a defined benefit component, a DC component or both. SB 3276 was sent to the Senate Executive Committee on March 8 for further consideration — it is the first of these bills to move at all. House Bill 5546 and House Bill 6145 take a different approach, creating a new tier of the state-run defined contribution plan for new public school employees and letting current employees leave the DB plan for those new programs.

Indiana House Bill 1004 had a rocky path with teachers’ unions thanks to provisions in the bill that granted teachers in harder-to-fill subjects with higher pay versus their colleagues despite an intensive collective bargaining process already in place. The retirement provisions of the bill established an optional DC plan for new employees instead of giving them access to the current system. Though the bill passed the House, the salary controversy led Senate President Pro Tem David Long (R) to pronounce it dead last week. The teacher pay provisions (without the retirement plan language) have already been revived in Senate Bill 10.

If you have any questions about any legislation or want to get involved in your state, please contact Ray Harmon, Esq, government affairs counsel for NTSA, at [email protected].