Panel endorses 2 retirement plans for new teachers
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HELENA (AP) — An interim committee trying to close a potential $1.5 billion long-term funding gap in the Teachers Retirement System is sending the full Legislature two proposals that would change benefits for new hires.
The State Administration and Veterans' Affairs Interim Committee endorsed competing plans on Tuesday. One would reduce costs to the system by creating individual retirement accounts based on new teachers' contributions. The second would base benefits on a new teacher's last five years' salary instead of his last three.
But the committee left to the full Legislature whether taxpayer contributions to the fund should be increased.
"The (2011) Legislature is going to have to decide on how much to raise employer contributions" to public pension funds, said Sen. Joe Balyeat, R-Bozeman, who offered the two proposals.
The committee couldn't agree on changes to the state Public Employees Retirement System. That fund's potential shortfall is $790 million to $1.3 billion.
The eight-member panel is charged with recommending how to fix the state's pension funds for nearly 30,000 retired public employees and teachers or their survivors. The value of both systems plummeted during the dramatic stock-market decline of 2008.
The panel voted to draft two bills for the Teachers Retirement System for the Legislature when it meets in January. Democrats and Republicans on the committee said they would not have been able to agree on one proposal.
"I don't think anyone is going to fault us for not coming up with a specific plan," said Rep. Tim Furey, D-Milltown.
Tom Bilodeau of MEA-MFT, the union representing public-school teachers and other employees in Montana, said the union opposes the individual retirement account plan because it "doesn't come close" to matching benefits of current employees covered by the retirement system.
Consultants said changing benefits for new hires can lower pension costs in the long run. But reducing benefits for retirees already in the system has been challenged in courts in other states as a violation of their employment contract, said Doug Fiddler of Buck Consultants.
But simply changing benefits won't come close to covering the huge, long-term shortfalls facing the funds, Fiddler said.
"Any of these alternatives are still going to require some increases in contributions (from the taxpayers) or a remarkable recovery of the market," he said.