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Published September 21, 2010, 09:24 PM

ND Lawmakers Mull Teacher Pension Changes

Ending pension benefits for new school teachers and government workers in favor of 401(k)-style retirement savings plans would cause North Dakota's pension funds to run out of money more quickly, analysts said Tuesday.

BISMARCK, N.D. (AP) — Ending pension benefits for new school teachers and government workers in favor of 401(k)-style retirement savings plans would cause North Dakota's pension funds to run out of money more quickly, analysts said Tuesday.

The switch would lift some future benefit obligations for the North Dakota Public Employees Retirement System and the Teachers' Fund for Retirement, analysts told a legislative committee that oversees employee benefit programs. But they said it would have little effect on current pension payments, which would strain the funds' cash reserves.

Both funds try to reach long-term growth targets of 8 percent annually. If they were closed to new members, they would have a difficult time meeting those goals because the funds would be managed more conservatively, analysts J. Christian Conradi and Kim Nicholl said.

To meet their short-term benefit payment demands, the funds would need larger holdings in bonds and other lower-risk investments that can readily be converted to cash instead of stocks, private equity funds and other investments that are held in hopes of generating bigger returns, they said.

Conradi, who works for the Teachers' Fund for Retirement, is a senior consultant for Gabriel Roeder Smith & Co., of Southfield, Mich. Nicholl is a senior vice president for the Segal Co., in Chicago, which reviews the pension funds managed by the North Dakota Public Employees Retirement System.

Spokesmen for the North Dakota Education Association and the state Public Employees Association said they favored proposals to raise pension contributions from employers and the workers themselves as part of an effort to rescue their pension funds, which have been hammered by recent stock market declines. The NDEA also supports raising the retirement age for teachers who are not close to retirement.

Greg Burns, an NDEA spokesman, and Stuart Savelkoul, director of the Public Employees Association, said ending pension fund participation for new employees would be more expensive for the state and provide less security for workers.

"Our members have demonstrated that they want to be a part of the solution," Burns said. "We're willing to make some sacrifices to be a part of that solution without doing things that are draconian, things that are demonstrated not to work, things that could cost more, and things that erode ... the security of public servants and teachers."

Actuarial reports say both the Teachers' Fund for Retirement and the Public Employees Retirement System's main pension fund will be exhausted in about 30 years unless changes are made.

The Legislature's benefits committee will introduce a number of proposals to revamp the funds, said its chairwoman, Rep. Bette Grande, R-Fargo. The panel is scheduled to meet again in late October to review the bills again and decide which should be favorably recommended to the 2011 Legislature, which begins its session in January.

The pension funds for teachers and state government workers offer employees a guaranteed monthly benefit payment when they retire. Their pension funds are handled by outside managers, and they are not required to make investment choices. If the pension funds themselves cannot pay benefits, North Dakota taxpayers will be obliged to make up the difference.

Some North Dakota lawmakers have sought to end the guaranteed arrangement in favor of 401(k)-style savings plans. Workers and employers would be able to put money into employees' retirement accounts, which the employees would control. The workers themselves would make investment management choices.

Pension funds with guaranteed benefits are rarely available to workers outside of government, said Rep. Frank Wald, R-Dickinson, a member of the benefit oversight committee.

"How do we design a plan so that the taxpayer is not on the hook to fund somebody's retirement plan?" Wald asked. "People in this country are getting sick of bailouts."

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