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TEXPERS Opposes Defined Contribution Proposal

Bill would move new city employees to 401 (k)-like retirement plans

The Senate's State Affairs Committee held a hearing April 24 for Senate Bill 1752, which if enacted, would require certain municipalities to establish 401 (k)-like defined contribution retirement plans to certain employees. The Texas Association of Public Employee Retirement Systems continues to oppose the bill.

(Screen Capture: From left, Jim Smith, a TEXPERS board member and trustee of the San Antonio Fire and Police Pension Fund, listens as TEXPERS Executive Director Max Patterson addresses the Senate State Affairs Committee during an April 24 public hearing.)
 


The Senate's State Affairs Committee held a hearing April 24 for Senate Bill 1752, which if enacted, would require certain municipalities to establish 401 (k)-like defined contribution retirement plans to certain employees.

The bill, authored by Dist. 7 Sen. Paul Bettencourt, would require an election to create a defined contribution plan for newly hired municipal employees. Defined contribution plans require employees to put their own money into a 401 (k)-like fund, which means the employee acts as their financial analyst to choose among a limited set of mutual fund options.

According to the proposed bill, employees with defined benefit plans would not be switched to defined contributions and persons with prior employment of a municipality and under a defined benefits program would not be required to switch to a defined contribution plan. However, the there is no indication the plan will save municipalities that contribute some money to their municipal pension systems will reduce costs.
Bettencourt presented the bill to the committee saying that there is wide support for it. Although asked by committee member Sen. Craig Estes (Dist. 30) if there were stakeholders in support of bringing new hires into a defined contribution plan, Bettencourt said he didn't know if municipalities would support the plan.

Representatives from TEXPERS, Houston Police and Retired Officers Association, Houston Police Officer's Union and the San Antonio Fire and Police Pension Fund spoke against the plan. Fourteen other people registered against the bill but did not testify during the committee meeting.
During public testimony, Ray Hunt, president of the Houston Police Officers' Union, said Bettencourt didn't mention how much money municipalities would save by switching new employees to a defined contribution plan because an impact study has not been performed.

“Until voters have the facts as to whether or not this is going to cost money or save money I think it is extremely irresponsible for anybody to proceed with this,” Hunt said.

Max Patterson, TEXPERS' executive director, also spoke during the public comment period and told the committee that public employee pensions are complex and may be difficult for citizens to have to hash out. That is the job of the public officials that citizens voted to represent them, he said.

“When the public votes for representatives, they are voting for people who will represent them and hopefully make right decisions,” Patterson said.
Patterson, who spent more than 20 years in municipal government, said voters depend on their state and local public officials to hold hearings, discuss topics and make decisions necessary to run the government.

The bill was left pending in the committee. Click here to watch a video of the committee meeting.
 

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