Nevada Lawmakers Review Bill Aiming to Transition Pension System to 401(k) Plan

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A panel of Nevada lawmakers on Wednesday examined a bill – officially titled AB190 – that would give the state’s pension system more features of a 401(k) plan.

The goal of the measure it to ebb the state’s $12 billion unfunded liability. From the Associated Press, via the State:

The measure would add a defined contribution option for employees hired after mid-2016 that would limit pension payouts based on how much money public employees contribute. The existing “defined benefit” plan promises employees a specific payout upon retirement, but Kirner said investment returns that fall below predictions have fueled the growth of the unfunded liability.

The defined contribution plan will help control the debt, and the portability of the plan will be attractive to a generation of younger workers that tends to switch jobs more often, Kirner said.

The bill also caps payouts to retirees in the traditional plan at no more than 133 percent of the income the employee earned during their three highest-paid years. Participants would have to work until the Social Security retirement age of 67 to receive full benefits under the bill, or 57 if they are a police officer or firefighter.

The top official at Nevada PERS raised several objections to the bill. From AP:

Public Employees’ Retirement System chief Tina Leiss raised a laundry list of concerns about the bill, arguing that it doesn’t provide a way to pay down the existing unfunded liability. The state is on track to pay down the $12.5 billion in 22 years but would be thrown off if new hires enroll in the defined contribution plan and stop paying toward the debt.

“If we don’t continue to get the same amount of money to pay that,” Leiss said, “it will grow.”

She said current employers and employees would have to increase their contributions by 15 percent to keep paying down the unfunded liability — about $700 million to $800 million a year.

Leiss also argued that the plan might pay out so little to employees that they would need to draw Social Security benefits, and that would require additional contributions from the state.

Read AB190 here.

 

Photo by TaxCredits.net

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