Benefits February 13, 2012

Wyoming Legislator Proposes DC Plan for State Employees

February 13, 2012 (PLANSPONSOR.com) – A Wyoming state representative proposed a bill to offer new state employees a defined contribution plan instead of the state’s pension plan.
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Under Representative Bryan Pedersen’s bill, current employees would stay on the state’s defined benefit pension plan, but employees hired after July 1, 2014, would enter a defined contribution plan similar to a 401(k) plan, the Wyoming Tribune Eagle reports. Pedersen said this will give the state more predictability and control over its retirement fund.  

According to the latest report from The Pew Center on the States, the Wyoming Retirement System is 89% funded (see “Report $1.26T Funding Gap for State Retiree Obligations”).

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According to the Tribune Eagle, Pedersen said Wyoming’s pension plan is still among the strongest in the nation; however, depending on the assumed investment returns in coming years, the state’s retirement fund could be considered underfunded by 2025 or earlier if changes are not made.

One obstacle to Pedersen’s proposed bill is that because this is only a 20-day budget session, many have predicted it will be hard to pass many weighty issues outside of the budget and legislative redistricting bills.

In addition, the Wyoming Retirement System Board of Directors voted last year to support the current defined benefit plan, rather than change to a 401(k)-style defined contribution plan. “The Wyoming Retirement System Defined Benefit Plan provides a retirement income to its members without subjecting them to the financial market risks of a defined contribution plan,” the group said in a resolution in support of not changing plans.

The news report said a Wyoming Retirement System survey of active employees also shows there is not much support for a 401(k)-style plan without getting more information first. The 2011 survey by the state asked 3,474 employees if they would prefer a defined contribution plan similar to a 401(k) plan in place of their current defined benefit pension plan. Only 3.3% of the respondents said they prefer a defined contribution plan. About 44% said they prefer their current plan, and 42.8% said they needed more information to decide.  

Members of the Senate Appropriations Committee are working on another bill draft that would make changes to the state’s current defined benefit plan, incliuding removing cost-of-living increases for certain plans, limiting future benefit increases and requiring a study to recommend additional adjustments.

State Representative Steve Harshman said he favors this approach, rather than Pedersen’s plan. He said the retirement plan is stable enough that it does not require a wholesale revision, and there is not enough time for such a complex issue to pass this session.

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