Pension panel OKs 2% cost of living hike

A bill to grant a 2 percent cost of living increase to retired participants in six Oklahoma state pension systems passed out of a House committee Wednesday and is headed for a vote before the full House of Representatives. “We're pushing for it because our retirees need it,” said Ginger Sigler, executive director of the Oklahoma Police Pension and Retirement System. “They haven't had one since 2008, and it's time.” A 2 percent hike would provide $30 or $40 extra a month to the average retired police employee, she said. Other state pension systems included in the proposed 2 percent benefit hike include the Teachers' Retirement System of Oklahoma, the Oklahoma Public Employees Retirement System, the Oklahoma Firefighters Pension and Retirement System, Oklahoma Law Enforcement Retirement System and Uniform Retirement System for Justices and Judges. Late last year, the pension systems gave most retirees a one-time payment that, for many, was equal to 2 percent of their yearly distribution. The current proposal would be a permanent 2 percent cost of living increase. It calls for the benefit hikes to begin Nov. 1, 2020. The proposed hike is projected to increase the liabilities of the state pension systems by about $441 million, said State Rep. Avery Frix, R-Muskogee, author of House Bill 2304. Frix's bill would require the pension systems to pay for the increases from existing assets and revenue streams without providing additional funding. Frix originally proposed an 8 percent cost of living adjustment, but amended the proposed increase to 2 percent before the bill was heard by the House Banking, Financial Services and Pensions Committee. Some lawmakers had expressed concerns about the strain an 8 percent increase would place on some of the more poorly funded systems. The ease with which the state's pension systems could absorb even the 2 percent cost of living increase varies markedly. The judges' pension system was 114.8 percent funded and the police pension system was 102.8 percent funded as of July 1, putting them in strong financial position to absorb a 2 percent benefit increase without straining their systems. At the other extreme are the firefighters' pension system, which is only 68.1 percent funded, and the teachers' system, which is 72.9 percent funded. The other two systems are at least 90 percent funded.

Impact on teacher system a concern

The impact of the proposed benefit increase on the teachers' system is of particular concern to many lawmakers, because it is by far the largest system. Tom Spencer, executive director of the teachers' system, said the actuarial liabilities of the teachers' retirement system currently exceed its assets by $6.12 billion. A 2 percent benefit hike would increase those liabilities by about $243 million, he said in an email to lawmakers. The system currently has a funding plan in place designed to gradually eliminate the unfunded liability of the plan in 14 years, but if the increase is granted it would increase that time to nearly 15 years, he said. Frix said he was proposing the 2 percent pension benefit hike for participants in all six pension funds, rather than just the ones that were in better financial shape, because he thought that was more equitable. Frix said he decided to author the bill after talking to a retired teacher who told him the cost of her “health insurance was more than her retirement check.” The committee voted 11-0 to advance the bill to the House floor, but not without some misgivings. Lawmakers noted that the teachers' retirement system already receives 5 percent off the top from Oklahoma sales, use and corporate and individual income tax revenues.