Establishes a hybrid retirement benefit structure for members of the state retirement systems first hired on or after July 1, 2020 (OR INCREASE APV)
The impact of HB 39 is expected to increase employer contributions that will be split between the DB and DC components of the hybrid plan. While on the surface, it may not impose a direct fiscal burden on the state given that overall government revenues are not anticipated to change materially due to this measure, the employer contribution requirements will see an increase. The indeterminate implementation costs associated with setting up the hybrid plan are projected to be significant, particularly in modifying computer systems, creating training material, and other logistical needs. Estimates suggest these costs could approximate $808,636 across four state retirement systems during the initial year of enactment.
House Bill 39 proposes a hybrid retirement plan for employees of the state who are first employed on or after July 1, 2020. Under this bill, new state employees will participate in a combination of a traditional defined benefit (DB) plan and a defined contribution (DC) plan. The intent of this plan is to provide an enhanced retirement benefit structure while also managing the state's long-term pension liabilities. The bill aims to address the funding challenges faced by public retirement systems by introducing a shared responsibility model for both employees and employers in managing retirement benefits.
The sentiment regarding HB 39 appears to be mixed among stakeholders. Proponents argue that the hybrid model will better align benefits with the contemporary workforce's needs while potentially improving the sustainability of the state’s retirement systems. Critics, however, may express concern over the perceived reduction in security that a defined contribution system may pose compared to traditional defined benefit plans, especially for employees nearing retirement in a longer-term employment context.
One notable point of contention surrounding HB 39 is the impact on existing employees and retirees under the current system, who may see their benefits altered by the introduction of this hybrid model. There are concerns that splitting contributions between a DC and a DB plan could disadvantage those who have invested significant years in service. Additionally, the transition and administrative expenditures associated with this change have been highlighted as potential risks that could impact the overall efficiency of retirement systems, creating further debates on the best approach to public employee pensions.