House Bill 2077 authorizing an optional defined-contribution retirement plan for state employees hired after July 1, 2014 passed the Oklahoma House of Representatives and is now on its way to Gov. Fallin’s office for consideration. If signed into law, new employees may elect to participate in the new program instead of the Oklahoma Public Employees Retirement System (OPERS), a defined benefit plan. The bill does not apply to persons currently in the OPERS system as active or retired state employees.
The bill’s house author Rep. Randy McDaniel believes this program will fill a need for a “mobile” pension system as required by a modern workforce.
“The core principles in HB2077 are enhanced mobility, economic opportunity and freedom,” McDaniel said. “It meets the need that some employees have expressed with more mobility.” He hopes the pension will help state agencies hire the “best and brightest” employees who may have worked for another employer prior to joining a state agency and want to have a defined contribution plan. He sees the plan as a recruiting tool for state agencies in hiring qualified employees.
Employees who participate in the plan will contribute funds from their paycheck and their employer will also contribute. Employees may contribute between three and seven percent of their salary to the plan which will be matched by their employer. The funds are then placed into a 401(a) or 457 plan.
Those in the plan will be vested after five years of service. If an employee leaves before five years, they would receive 100 percent of what they had paid in to the plan and between 20 and 80 percent of their employer’s contribution depending on years of service when they left state employment. Funds in the plan would be invested similar to how OPERS funds are currently invested and would be available to the employee when they retire from the state. Persons who leave state service before retirement could transfer the account to a similar account with their new employer.
During the bill-making process, OPEA worked with Rep. McDaniel to revise language that could be detrimental to the current retirement system. It has been OPEA’s stance that any changes to the retirement system should be only for “new hires” after implementation. Also, no changes should be implemented that could weaken the current OPERS system.
This bill does provide for funds from state agencies that would go into the OPERS system to help fund it. Even when an employee elects the defined-contribution plan, their state agency will still be paying-in to the OPERS plan to help maintain it. The new employee will not contribute to OPERS out of their salary and will not be eligible for its benefit.
OPEA appreciates working with Rep. McDaniel to fine tune this legislation and looks forward to working with him during the next year to ensure a program that meets the needs of both employees and the state agencies they work for. If you have questions about this plan, please contact Trish Frazier at OPEA.