COLUMBIA — The state Senate approved Wednesday a pension reform plan that puts most of the changes on new employees.
Sen. Greg Ryberg said the bill shores up the state retirement system, ensuring workers receive checks decades from now, in a way that honors promises to current employees, thereby avoiding a lawsuit. Advocates for public workers have praised the Senate’s plan.
“I feel confident from a legal standpoint, we’re on firm ground,” said Ryberg, R-Aiken, who led a panel that put together the plan.
He said it maintains the state’s gold-standard credit rating and “tells the economic development community South Carolina is serious about funding its debt.”
The state’s $15 billion unfunded, long-term liability represents the difference between current assets and what the state owes if every worker retired immediately. The changes would increase the funded ratio in the state’s main retirement system from 65 percent this year to 84 percent in 29 years.
The current system has 51 years’ worth of unfunded liability, Ryberg said. The plan puts the funding period at 29 years in 2012 – below the 30-year mark that puts the state’s credit rating at risk – and drops to just seven years in 2041, according to handouts from Ryberg.
The plan requires another vote to return to the House, which passed its version in March.
The Senate version allows current employees to continue factoring up to 45 days of unused vacation and 90 accrued sick days into their benefit calculations at retirement. It also continues to base benefits on employees’ final three years of pay, rather than using a five-year average.
The changes would apply only for employees hired after June 30. The House plan applied those anti-spiking efforts to current workers, too.
Under both plans, current employees could continue to retire with full benefits after 28 years of working. The House increases that to 30 years for new employees, while the Senate panel applies a so-called “rule of 90,” meaning that the worker’s age and years of service must equal 90. In the separate retirement system for roughly 27,000 law enforcement officers and firefighters across the state, new employees could retire after working 27 years, up from 25.
All employees would contribute more – an additional 1.5 percentage points over three years, to 8 percent, instead of 1 percentage point over two years under the House plan. Both plans lock in the 1-percentage-point increase in employers’ contribution to their workers’ pensions – the taxpayer-funded portion – that a state panel approved last fall, to 10.6 percent.
The Senate plan also eliminates in 2018 a special retirement program that allows public workers to officially retire but remain on the job for up to five years and accumulate pension benefits. The House plan eliminates the Teachers and Employee Retention Incentive program, or TERI, only for new hires.