Pension changes clear S.C. House

abeam@thestate.comMarch 22, 2012 

SC State House

THE STATE

  • Retirement-system changes The S.C. House of Representatives voted 86-27 Wednesday to change the state retirement system. A look at what they did: Changes for current employees, new hires Changes would affect current employees starting July 1; employees would retain the benefits they have accumulated under the current system. Pay 7.5 percent, instead of 6.5 percent, of each paycheck into the retirement system; would be phased in over two years for an average increase of $408 a year Pay more money to buy “service time” to retire early Could not use vacation days, sick days or overtime pay to calculate retirement benefits Use five years of salary, instead of three, to calculate retirement benefit, a move that could lower benefits Changes for new hires only Work 30 years before you are eligible for full retirement, up from 28; police officers and firefighters still could retire after 25 years and use overtime to calculate their retirement benefit, regardless of when they were hired Not eligible for the TERI program, which allows workers to retire and then return to work Changes for retirees Annual benefit adjustments would be tied to the performance of the retirement fund’s investments. If the investments don’t make money, retirees wouldn’t get a raise. Changes for state lawmakers Pay 11 percent, instead of 10 percent, of each paycheck into the state retirement system. Lawmakers could not retire and draw benefits while in the Legislature

View Roll Call vote at bottom of the story

State workers — including teachers, local government workers, police officers and firefighters — would pay more and get less from the state’s retirement system, according to a bill that House lawmakers approved Wednesday.

In return, state taxpayers would save $8 billion over the next 30 years. And the moves would trim $2.2 billion from the retirement system’s deficit, according to projections from a pension consulting firm.

The changes would affect all of the 505,537 members of the S.C. Retirement System and the Police Officers Retirement system — nearly 11 percent of the state’s population.

The bill passed 86-27. Twenty-seven of the House's 48 Democrats voted against the bill, now headed to the state Senate.

If the bill becomes law, South Carolina will join 40 other states that have passed some form of major retirement reform since 2010, according to the National Conference on State Legislatures. The changes almost certainly would produce a lawsuit. The last time lawmakers changed retirement benefits, in 2006, those changes were overturned by the state Supreme Court, costing the state $38.7 million that was paid to 14,000 retirees.

Democrats, lead by state Rep. Harry Ott, D-Calhoun, and Joe Neal, D-Richland, tried repeatedly to exempt workers who are within five years of retirement from the changes. Pension consultants have told lawmakers the system needs to be at least 80 percent funded by 2041. The proposed changes would have the system 86 percent funded by 2041, leading Democrats to argue there is money available to exempt workers who are close to retirement.

“I simply don’t believe it’s fair to this small group of people to pull the rug out from under them and give them a new set of rules that they have to play by,” Ott said.

But Republican and Democratic supporters of the bill said if those employees were exempted, others would clamor for exemptions as well. And lawmakers said they could no longer ignore the math. Without the changes, South Carolina’s pension deficit would double to $26 billion by 2041, threatening the financial solvency of the system.

“We’ve had some folks come to us and say, ‘This (retirement system) isn’t bad,’ ” said Rep. Jim Merrill, R-Berkeley, chairman of the House subcommittee that wrote the bill. “That is absolutely insane. We weren’t sent here to punt, and that is what is being advocated by so many folks.”

Current employees would have to put an extra 1 percent of their salaries into the retirement system, about $408 more a year for the average worker. And they would no longer be able to store up unused vacation days and sick days to boost their retirement benefits.

Some Democrats worried how the moves would affect teachers, who would be faced with either using their vacation or sick days — and handing their classes over to substitute teachers — or losing them.

“It’s important to give the teachers some incentive to stay on the job,” said state Rep. Jimmy Bales, D-Richland.

Bales sponsored an amendment that would have allowed current state workers to continue to store up their unused sick and vacation days. The amendment failed 75-40.

“If we (are) reaching a point where our work ethic is such (that) we are going to not make the system solvent because we are worried that people will use their sick days inappropriately, that is an awful excuse,” Merrill said.

Retirees’ benefits would not change. But the bill would strip them of their guaranteed annual 1 percent cost-of-living adjustments. Instead, those adjustments would be tied to the retirement fund’s investments. If the investments make money, retirees get a raise. If the investments don’t make money, retirees would not get a raise.

This is a problem, according to Wayne Bell, president of the S.C. Retirees Association, because it hurts “what little future we have left, understanding that we are on the downhill run to death.”

“The uncertainty is what drives up our anxiety,” Bell said.

The fight is not over. The bill now heads to the state Senate, where a Finance subcommittee has been meeting for months to examine the retirement system, including a meeting Tuesday.

“It is by no means a perfect legislation, but it’s a good start,” said Jarrod Bruder, executive director of the S.C. Law Enforcement Officers Association. “We’re looking forward to what hopefully is going to come out of the Senate.”

See how your representative voted

Reach Beam at (803) 386-7038.

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