Over the last several years, various states have been considering pension reform to address funding shortfalls. Some have looked at increasing employee contributions. Others have considered raising their retirement age or lowering benefits. Pennsylvania is now attempting to deal with $50 billion in unfunded pension obligations and a funded status of only 60 percent. Their plan is to make cuts that will affect current workers’ retirement benefits.
According to the Milliman Public Pension Funding Study, which evaluates the largest 100 pension funds in the nation, some plans are faring even worse than Pennsylvania’s – Indiana Teachers at 50 percent funded, Chicago Municipal Employees Pension at 42 percent, Connecticut State Employees at 41 percent, Illinois State Employees at 37 percent and, worst of all, the Kentucky Employees Retirement Fund at 25 percent.
South Dakota is among the states considering pension reform this year, but unlike other governments, we aren’t experiencing a crisis. In fact, South Dakota’s Retirement System is consistently among the best-funded retirement systems in the nation. We measure our funded status at the end of each fiscal year. As of June 30, the South Dakota Retirement System was 104 percent funded.
Virtually all government employees in South Dakota fall under the South Dakota Retirement System. This includes all public school teachers in our state, all public university professors and employees, all state employees, and many county and city employees – all under the S.D. Retirement System. Third grade teachers in Canton, snowplow drivers in Mobridge, social workers in Winner, university professors in Madison, police officers and firefighters in Rapid City – all in the one plan.
At its December board meeting, the SDRS Board of Trustees unanimously approved a new retirement design for new public employees who begin work after June 30, 2017. The new design accommodates longer life expectancies, adds variable hybrid benefits and eliminates inequitable subsidies. Those who fall under the new design will not be subsidizing members of the current design. Both designs will be self-sustaining.
Unlike reforms in other states, this change will not affect current employees – not now, and not when current employees retire. It will not impact those who are already retired. And this change will not require additional contributions from employees or employers. The Board’s recommendation is under consideration by the Legislature this session.
I am proud of how we have responsibly managed the South Dakota Retirement System. Thanks to the conservative management of the Retirement System Board of Trustees, the outstanding performance of the SD Investment Council, and the cooperation and support of all stakeholders, our pension plan is sound.
I am equally proud that we are considering reforms now, when we are in a position of strength. South Dakota is not waiting for a crisis to tackle this issue. We’re taking this on now so the benefits of our future teachers, social workers and firefighters remain secure. South Dakotans act with responsibility and with foresight. As some would say, “It’s how we roll.”