The House subcommittee is set to hear from a consultant Wednesday on how changes to its proposal would affect the system’s solvency. Legislators are looking to shore up a system with $13 billion in unfunded liabilities, which represents the difference between the state’s assets and what it would cost if all workers retired immediately.
“We asked them to clarify different options and boil it down to the impact those options would have,” said Rep. Jim Merrill, R-Charleston, who’s leading the subcommittee.
He hopes the panel’s work will lead to actual legislation filed in the House as soon as next week.
Public employees currently have to work 28 years for full retirement, and there are no age thresholds.
Under a draft approved in December, employees would have to work 30 years and be at least 62 years old to draw full retirement. That initial plan would’ve exempted workers within five years of retiring.
That plan could change.
Options up for discussion this week include applying any changes to new hires only. The subcommittee will also consider letting workers either work 30 years or retire at age 62, rather than meet both qualifications.
Rep. Gilda Cobb-Hunter, who sits on the panel, asked to insert the “or,” saying the state may otherwise damage the quality of the state’s work force.
If the state’s message to new employees is that “you have to give me 30 years of your life and work to age 62, no one’s going to want to work for government,” said Cobb-Hunter, D-Orangeburg.
The panel also plans to decide when to kick in cost-of-living increases for retirees.
Other proposals in the draft include requiring employees to kick in an additional percentage point of their salary toward their retirement, and changing the calculations for determining benefits.
The draft would base those calculations on employees’ highest five years of pay, rather than three, to prevent spikes due to final promotions or job changes within the public realm.
The calculations would no longer include money paid for unused sick days and vacation at the end of careers. It would not include overtime, except in jobs in which overtime is mandated.
The meeting comes a week after questions were raised about the pension system’s investments.
Treasurer Curtis Loftis told senators he believes the state’s pension system is overly extended on alternative investments, which represents those outside of stocks, bonds and cash. The state’s portfolio is underperforming and spending too much on fees, he said.
Also last week, the head of the State Law Enforcement Division confirmed his agency is investigating a report that investment companies were told they could improve their chances of handling state pension investment work if they paid a friend of Loftis.
Charleston investor Mallory Factor, whose research triggered the investigation, said he had done nothing wrong and was trying to help the state make and save money. He said the agency contacted him about the investigation and said they are treating him as a witness, not the target of the inquiry.
As treasurer, Loftis sits on the six-member commission that manages the state’s portfolio. He is the only elected member.
Merrill said the questions show the investment commission itself also needs some reform, though he said that should probably be handled separately.
“I don’t know that we want to bog this down with it,” he said. “There’s a little something not quite right there. We want them to be aggressive and maximize returns, but we don’t want to incentivize it such an extent that people do things for the wrong reasons. When all’s said and done, they’re not playing with their money.”