State lawmakers carved some $7 billion in long-term pension costs last year by putting a freeze on cost-of-living-adjustments in two older retirement plans. New ideas this year could further trim the state’s long-term liabilities.
Republican Sen. Joseph Zarelli has floated a bill that would force new hires in state and local governments into what are called hybrid pension plans, which are optional now. Hybrid plans are split – one half providing a traditional pension payment in a worker’s retirement years, the other half providing a contribution to an investment fund much like an IRA or 401(k) that the worker would manage.
“Going to a hybrid pension system for all new employees means the government has less liability and more stability in the long run, and that should make for significant savings overall,” Zarelli said in a news release last week to announce several proposals to cut state obligations and firm up the budget.
“It isn’t the sweeping sort of reform the pension system could use,” he said, “but it is a step the Legislature should be able to take this year.”
Zarelli’s pension idea, Senate Bill 6378, gets a hearing at 3:30 p.m. Thursday in the Senate Ways and Means Committee. The bill has two other pieces: letting the state skip a $130 million payment in the Plan 1 retirement accounts next year, and eliminating the early retirement benefit for newly hired workers.
He says the three elements of his pension bill could save the state $2.3 billion over 25 years.
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