The Retirement Freedom Act has been upheld in the Oklahoma County District Court.
In 2014, House Bill 2630 created a new defined contribution plan for future state employees that are members of the Oklahoma Employees Retirement System. The legislation was authored by Rep. Randy McDaniel, R-Edmond.
“I applaud the court’s decision,” said McDaniel, chairman of the House Business, Labor and Retirement Laws Committee. “The bill is designed to promote more individual freedom, less government debt and greater long-term prosperity for the state.”
Oklahoma’s traditional defined benefit system had accumulated an unfunded liability in excess of $16 billion by 2010. The funding deficit was more than $500 million per year, despite record annual contributions.
The state pension system was ranked nationally in the bottom five and trending toward insolvency.
State leaders took action and have implemented billions in cost saving reforms, including a measure that requires additional funding in order to grant any new benefit. As a result, the funding gap has been closed and the unfunded liability has been reduced to $8.8 billion, the lowest level in a decade.
While the improvement is significant, the $8.8 billion in unfunded liabilities remains a concern for state lawmakers during these difficult economic conditions.
Moreover, numerous bills are filed each session to improve benefits that are detrimental to the pension system. The legislature’s independent actuary has been asked to make the official determination of whether these retirement bills are either fiscal or nonfiscal.
The conclusion of fiscal leads to additional funding requirements.
HB 2630 was investigated and determined by the legislative actuary to be nonfiscal at every stage of the legislative process. Attributes of defined contribution plans include the predictability of costs and the absence of liabilities since employer contributions are made upfront.
“The legislative procedures were followed. A transparent and healthy debate occurred. The bill was passed and signed into law,” said McDaniel. “The plaintiffs then turned to the courts.”
The bill was designed for prospective employees. The rights of active and retired employees to receive their earned benefits remain unchanged.
The motion for summary judgment has been sustained and judgment has been entered in favor of the defendants.
“I’m thankful for the favorable ruling,” said McDaniel. “As we think about the future, there are still many challenging economic factors to consider as we work together to improve the strength and security of the state retirement system.”