Each new state worker would be enrolled in a 401(k)-style retirement plan instead of South Carolina’s pension system beginning July 1, 2018, under a proposal unveiled on Feb. 20 by State Sen. Sean Bennett, R-Dorchester, a member of the Joint Committee on Pension Systems Review.
The reason why pension options are on the table — there are roughly $20 billion in unfunded benefits the state has promised to its retirees. The S.C. Legislature voted last year to boost the state’s pension system by requiring local and state government employees and employers to pay more into it South Carolina’s existing pension system depends heavily on the retirement contributions of current workers. If that revenue evaporates by closing the pension plan to future state workers, it could cost public-sector employers – state agencies, cities, counties, schools – a loss of $4.4 billion, according to an analysis done for the S.C. Public Employee Benefit Authority.
State lawmakers have also asked the Employee Benefit Authority to analyze if it would be cheaper to move state workers to a hybrid retirement system that mixes a state pension and 401(k)-style accounts.
Bennett says a defined contribution option would allow benefits to be transferred upon death to a living relative, which is not possible in traditional pensions. And individual accounts can be rolled over to other plans if the employee pursues new opportunities.
“People aren’t necessarily staying for 30 years” (at one job), Bennett told The State. “If they do stay for 30 years, they’ll be very pleased (under Bennett’s proposed plan). If they don’t, they’ll have the ability to take that elsewhere. It won’t negatively affect the existing pension plan.”
Other legislators point out that many state workers — around 40% of whom earn less than $41,000 annually — have too low a salary to devote to retirement.