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

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.