Lawmaker: All Current Public Employees To Be Exempt From Pension Reform

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State lawmakers say they’re drafting a proposal that will exempt all current public employees from any changes to Alabama’s pension system.

On Thursday, State Rep. Mac McCutcheon (R) confirmed that a bill being drafted by Gov. Robert Bentley’s office will insert the exemption clause for everyone presently in the system, regardless of how long they’ve worked for. McCutcheon told WHNT News 19 that only future employees hired after new reforms are passed would be affected.

“There is no doubt about the clarity of the bill,” said McCutcheon, who spoke with Bentley’s office on Thursday and confirmed the wording of the rough draft. “It’s going to address only those people who will be new hires…People who are presently employed, whether they are vested, or if they are in the one to ten non-vested years, as long as they are in the system now their retirement will not be affected.”

More than 160 city of Huntsville employees filed for retirement in January over fears that their pension plans would be changed. Police Chief Mark Hudson and City Administrator Rex Reynolds were among those who turned in retirement paperwork, despite earlier assurances that they would not be affected. But both public officials took a much more optimistic stance Thursday after talking with Governor Bentley’s staff earlier in the day.

“Certainly, after hearing what came out of the Governor’s office today, there would be a lot of retirement paperwork pulled in February,” said Reynolds, who has until March 1st to withdraw his retirement filing. “If the attitude and verbage stays the same through the February session, certainly I will be pulling my paperwork, and I suggest a lot of our employees will as well.

“If this follows through, it would certainly remove my concern,” said Chief Hudson, when asked about the latest developments. “I certainly would be removing my papers for retirement.”

State lawmakers have pledged to reform Alabama’s public employee pension system, which cost taxpayers more than $1 billion last year. Many have called the growing pension obligation unsustainable, with one recent study by The Economist predicting that Alabama’s fund would run out of money by 2023 without changes. Some of the proposals by lawmakers include raising the retirement age, and steering new employees into a revised system that would resemble a 401k fund used by many private sector workers.

Lawmakers have said that the RSA pension fund has become a bigger financial burden due to a substantial increase in the number of retirees over the last few years. They also cited the fund’s recent dismal performance in the markets, with taxpayers having to cover guaranteed returns that the fund failed to make. Legislators previously reported that roughly one-third of public pension payouts were covered by Alabama taxpayers in 2011, the highest percentage ever.

One step of pension reform was already enacted last year, with a law that raised the retirement contribution rate public employees must pay. The new number is now just over seven percent of total salary, a two percent increase from the old mark. Officials said the average private sector contribution rate was twelve percent of total salary.