The Oklahoma Supreme Court upheld a lower court’s ruling deciding a law giving thousands of new state government employees defined-contribution (DC) instead of defined-benefit pension (DB) plans was appropriately passed by lawmakers.
In June 2014, Gov. Mary Fallin (R) signed House Bill 2630 into law, giving all government employees hired after November 1, 2015, DC pension plans similar those enjoyed by those in the private sector. Defined-contribution plans provide for more-predictable worker costs and enable employees to take their benefits along with them when they move to other jobs in the private or public sector.
Two recipients of Oklahoma Public Employees Retirement System (OPERS) pensions, Joe Stevens and Cecil Dooley, sued the state government in October 2014, claiming lawmakers failed to submit legally required paperwork to other government agencies before filing the bill.
Trent England, vice president for strategic initiatives at the Oklahoma Council of Public Affairs, says defined-benefit pension plans, such as those being phased out by OPERS, are only as good as politicians’ promises.
“It’s important to understand that a defined-benefit plan is just a promise from a politician,” England said, because taxpayers in future years will actually have to cover any pension shortfalls. “Public employees deserve something better. They deserve a defined-contribution system, which means public employees actually own their retirement accounts and control their own future.”
More Worker Control
England says defined-contribution plans put government workers in control of their own lives.
“As a practical matter, defined-contribution accounts empower public employees to change jobs without losing any of their retirement accounts,” England said. “Over time, this should encourage people to consider public service even if they don’t intend to make it their entire career.”
Rachel Grezsler, a senior policy analyst for economics and entitlements at The Heritage Foundation, says DB pension plans allow lawmakers to overpromise and under-deliver.
“There’s a huge temptation to promise more than can be paid in the future, because the potential consequences are long-delayed and likely will only impact future retirees and future business management,” Grezsler said. “This is especially true for government-run DB plans. Politicians may only be in office for a handful of years, so they have all the incentive in the world to promise government employees’ unions higher pension benefits than [what is] feasible.
“Unlike businesses, [which] can go bankrupt due to unfunded pensions, governments just turn to taxpayers when they promise too much, and most state and local governments have few, if any, rules that require proper funding of their pensions,” Grezsler said.