Wednesday, February 23, 2011
NASHVILLE -- Tennessee could reap substantial pension savings by diverting new employee and teacher hires into a 401(k)-style plan where the state contributes money but doesn't guarantee benefits, Treasurer David Lillard said Tuesday.
Tennessee Consolidated Retirement System:* The $32 billion plan covers 61,379 state employees and higher education workers as well as 74,043 teachers and 79,289 local government workers.* An estimated 112,000 retirees are covered. Their annualized benefits are $1.53 billion.
Lillard told the GOP-run Senate Finance Committee that the $32 billion Tennessee Consolidated Retirement System plan remains one of the "best funded" plans among states.
The plan provides fixed benefits to 112,000 retired state and local workers as well as retired educators.
But Lillard warned that state and local governments face new contribution-rate pressures largely due to the plan's investment losses during the recession.
"We fared much better than other pension plans did for the most part, but it still is a substantial loss in terms of this plan," Lillard said.
Tennessee's pension has an estimated $2.7 billion accrued state liability that will have to be paid for or amortized over a 20-year period, he said.
Senate Minority Leader Jim Kyle, D-Memphis, later said it appeared that Republicans are laying the "groundwork ... to justify doing away with a defined-pension plan. Whether that's the right thing to do or not, we'll just have to see."
Lillard, a Republican, presented two possible alternatives using 401(k)-style elements for new hires.
His "scenarios" were not recommendations, Lillard said. He noted they would not affect current employees and teachers.
Sen. Brian Kelsey, R-Germantown, said during the hearing that he would be willing to consider such changes in 2012.
A number of governors nationwide, many of them Republican, have presented plans to cut back on retirement benefits or boost the amount that employees must contribute. But Republican Gov. Bill Haslam of Tennessee has not included pension changes in his package of legislation for this year.
The Tennessee Education Association's chief lobbyist, Jerry Winters, said Lillard briefed the group. Winters said making teachers' retirement "subject to the stock market is very problematic in this day and time."
He noted teachers are already fighting efforts by some majority Republican lawmakers that would do away with collective bargaining by teachers.
Tennessee State Employees Association Executive Director Robert O'Connell also was briefed. He said he was under the impression that Lillard's presentation was based on worst-case scenarios if investment income didn't rise sufficiently.
O'Connell said the association would be "upset" about changes.
"We like the retirement system just the way it is," he said.