Panel Backs Higher Contributions for ND PensionsNorth Dakota lawmakers endorsed proposals Tuesday to require government workers, teachers and their taxpayer-supported employers to set aside larger chunks of money to bolster pension funds that otherwise might run out of money in 30 years.
By: Dale Wetzel, Associated Press
BISMARCK, N.D. (AP) — North Dakota lawmakers endorsed proposals Tuesday to require government workers, teachers and their taxpayer-supported employers to set aside larger chunks of money to bolster pension funds that otherwise might run out of money in 30 years.
Separately, a legislative committee that reviews employee benefit proposals refused to support legislation that sought to close North Dakota's two largest public employee pension funds to new members. Instead, newly hired workers would be offered 401(k)-style savings plans, without any guaranteed retirement benefit.
Committee members also turned down a proposed $75 million infusion of taxpayer money into the Teachers' Fund for Retirement, which analysts said would quicken the fund's recovery from the effects of a severe stock-market downturn two years ago.
"They haven't made the case that (the $75 million) needs to be there," said state Sen. Raymon Holmberg, R-Grand Forks, a committee member who is chairman of the Senate Appropriations Committee. "When you look at the projections, with the money or without it, it really makes not much difference."
The rejected proposals may still be introduced in the North Dakota Legislature, which begins its 2011 session in January. However, pension benefit legislation that is not endorsed by the review committee often has a more difficult time winning lawmakers' support.
Analyst reports presented Tuesday predicted that both the Teachers' Fund for Retirement, which has about $1.4 billion in assets, and the North Dakota Public Employees Retirement System, which has about $1.5 billion, will run out of money to pay benefits in about 30 years unless changes are made.
The favored rescue approach for the Public Employees Retirement System would increase each worker's pension contribution from 4 percent to 8 percent in 1 percent steps over four years, beginning in January 2012. The employer contribution would rise similarly during the same four years, from 4.12 percent to 8.12 percent.
The Teachers' Fund for Retirement supports increasing teachers' contributions from 7.75 percent to 11.75 percent in 2 percent steps, which would take effect in July 2012 and July 2014. School districts' contributions would rise from 8.75 percent to 12.75 percent during the same time.
The teachers' legislation also lengthens the time at which a teacher may retire with full pension benefits and reduces the benefits available to those who retire early.
"They want to see everybody take ownership in this retirement plan, and I think this is the way to do it," said Rep. Bette Grande, R-Fargo, the chairwoman of the legislative benefits committee. "It gives everybody a better feel for what's down the road."
The Teachers' Fund for Retirement has about 9,700 active teachers and 6,500 retirees. The North Dakota Public Employees Retirement System, which covers state government workers and a number of local government employees, has about 20,000 active employees and 6,400 retirees.
Greg Burns, a spokesman for the North Dakota Education Association, said the teachers' group had endorsed the increased pension contributions. The request for $75 million in taxpayer support "was a long shot going in," Burns said.
"It was a hope. It's like buying a house," Burns said. "The more you put down on the principal, the less you have to pay later, but we understand people saying it's too much."
Stuart Savelkoul, director of the North Dakota Public Employees Association, said workers hope that pay raises will offset the impact of increased pension contributions.
"You create a potential for state employees, and public employees in general, to take home less money in 2011 than they took home in 2010," Savelkoul said. "Obviously, that's a major concern."
Rep. Frank Wald, R-Dickinson, who has backed phasing out the public employee pension system in favor of 401(k)-style retirement plans, said the private option should get more consideration from lawmakers. Analyses of the proposal said it carried significant upfront costs, and would cause the retirement funds to run out of money more quickly than they otherwise would.
"In many, many instances, retirement plans are under water, and the major reason is they're a defined benefit, which means the taxpayer guarantees the benefit," Wald said. "I really think we may be setting up a preferred class of citizens, where their retirement plans are guaranteed by the taxpayer, and in the private sector, you're on your own."