Editorial: Lawmakers must reform public employee retirement system
Most of the blather coming out of Carson City this legislative session has been about the various means that can be employed to tap
more tax revenue from the citizens. But finally someone has introduced a bill that would curb the state’s profligate spending.
This past week Republican Assemblyman Randy Kirner of Reno introduced Assembly Bill 190, which calls for reforming the Nevada Public Employees’ Retirement System (PERS), which under government voodoo accounting methods has an unfunded liability of $12.5 billion, but under the accounting methods the rest of us must use the liability is actually more than $40 billion — nearly $15,000 per capita and growing.
The changes Kirner proposes would apply to state and local government workers hired after July 1, 2016, leaving unchanged the benefits promised to current employees and retirees. “The bill protects people that are in PERS today,” Kirner told reporters. “A promise made is a promise kept.”
Currently the system is a 100 percent defined benefit program, in which the retirement benefit is calculated based on years of service and level of pay of the employee at retirement, regardless of the state of the economy.
AB190 would introduce a hybrid — part defined benefit, part defined contribution. A defined contribution plan is similar to the 401(k) programs used primarily by the private sector. Under this system typically a certain percent of the employee’s salary is invested in something like a mutual fund and the retiree benefit depends on the amount contributed and how well the investments perform. The taxpayer has no obligation to make up any difference on that part of a hybrid retirement plan. Defined contribution plans are also are more easily portable to another job or retirement system.
Kirner’s bill also would end the practice of allowing government workers to purchase up to five years of retirement credit and retire at 70 percent of highest pay after only 25 years on the job.
The bill also ties the minimum retirement age for receiving full benefits to that allowed under the Social Security Act, meaning retirees would collect full benefits for far fewer years, in many cases decades fewer. Police officers and firefighters would be able to retire with full benefits 10 years earlier.
Further, the bill requires a certain level of contributions toward retirement to come from both the employer and the employee. It bars public employee unions from using collective bargaining to increase the amount of contribution from the employer, a practice that over years has allowed some government workers to contribute nothing in lieu of higher raises.
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