North Dakota House Votes To Give Public Workers Defined Contribution Pension Option

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Under HB1452, introduced by Rep. Jim Kasper, would give new state hires the option of choosing a defined contribution pension plan instead of the existing (and fiscally in jeopardy) defined benefits pension.

SAB readers will remember that earlier this week there was a lengthy debate on the floor of the state Senate, in advance of passing a bailout of the current PERS pension system, about moving the state toward a defined-contribution system.

All that came out of the Senate was an authorization to study the matter. In the House they passed a bill authorizing new state hires to choose a defined-contribution plan. Here’s the floor debate, the bill passed on a 59-34 vote.

The real headache on pension issues is what to do about the current situation. That’s the point Rep. Amerman made, expressing concern that new hires choosing defined-contribution plans would rob money from the defined-benefits plans. That’s a fair point (though the bill carrier, Rep. Louser, points out correctly that the employees choosing defined-contribution plans are also removing themselves as burdens to the defined-benefits plans).

But the financial short falls of the existing system are the argument for changing things. The current system is failing, because it relies on steady growth of people paying into the system in order to keep funding those collecting pensions out of the system. Which is why we need to change the way we’re doing it, and a defined-contribution system is the way forward.

Still, though, that leaves an obligation to those in the existing system. Which is why we have to make this change now, while the state has the resources to make up any losses.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • http://nofreelunch.areavoices.com/ Kevin Flanagan

    Why should I have to pay for the retirement of people lucky enough to spend their lives on the state payroll? I saved from my old age, why didn’t they do the same?

    • http://Sayanythingblog.com The Whistler

      Is there really a difference between many “public service” jobs and retirement?

  • Conservative_Egghead

    I’m a Minnesota state employee, and had the option of a traditional pension or a 403b when I started ten years ago. If Minnesota, which has a much stronger state employees union lobby, can do it, than so can North Dakota.

  • sbark

    ……..”an obligation to those in the present system”………????……….they have a no risk job?……….a no risk retirement plan fully guarenteed by the state?

    If that is the case or is insinuated……..none of them will convert
    The Legislature should present a plan of declining pension plan coverage as time moves foward to put incentives into conversion.

    • Conservative_Egghead

      Give the employees some credit. I can tell you that a lot of us who work in the public sector are not big fans of our union leadership, and see the handwriting on the wall as to where both pensions and salaries are headed if the states and feds don’t get their fiscal houses in order. That’s exactly why the union leadership and Dems like Bill Amerman (who’s job in real life was as a union organizer at the Bobcat plant in Gwinner) are so against this idea: they know that younger public employees like me will take the 403b/457 option because we don’t trust the state’s ability to manage the fund. The older workers were relying on us to make up the difference.

      • sbark

        Great to hear. If the union took a vote–who controls the numbers at present? Or do you anticipate it being a Indiv. by Indiv decison as put together by the Legislators?
        Problem is, if the system, which depends on the younger employees paying in, lets them out……the systems decline speeds up faster, and the obligations from the taxpayors gets higher, it needs to be on a planned phase out for all involved….including the taxpayors

        • Conservative_Egghead

          In the Minnesota college and university system (I’m a North Dakota resident, but a Minnesota state employee), when we accept employment with the state, we are given an individual choice: join the state pension system, or pay into a 403b account instead (the 403b is for educational employees specifically; non-educational employees would be in a 457; same concept, different part of the tax code). If I’m reading the House bill that Rob posted about correctly, the North Dakota system would switch to the same type of system: new employees could make an individual choice.

          I don’t disagree with you about the acceleration of the problem. The problem is that many State Constitutions treat defined benefits as contractual obligations (or the State Supreme Courts have interpreted them as such), which will probably mean that the states are going to have to deal with some form of bailout. I’d rather see them cut off new enrollments into the pension fund, which then at least limits the long-term bleeding.

          Quite frankly, I don’t know why a younger person (I’m 43) would want to be in the pension system: when those things go belly-up, it’s going to be ugly (despite the Constitutional assurances; Illinois or California, for example, can raise taxes all they want to cover these losses, but as the industrial/commercial base withers in those states, they’ll have a harder time meeting the obligations). At least I own the funds in my individual account.

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