Posted: Mar 13, 2013 8:48 AM by Marnee Banks - MTN News
HELENA - A legislative panel has narrowed the options for fixing the state's pension crisis.
The retirement system for state workers is currently facing a $4 billion funding shortfall.
A subcommittee made up of Republicans, Democrats, senators and representatives took action on a stack of bills that attempt to shore up the state's pension system and after all the voting, two plans remain.
The first option is a defined benefit plan that would guarantee the retiree a predetermined benefit every month regardless of how the investment performs.
The second plan is the defined contribution plan, where the monthly retirement payment could fluctuate based on investments and earnings, and the only amount guaranteed is the contribution the state puts in.
"The compromise was to move both of the very opposite kinds of plans out," explained Sen. Dave Lewis (R-Helena).
The state currently offers a defined benefit plan, but it's facing a $4 billion funding shortage.
So, in order to make the fund solvent, Democrats are proposing to ask employees to pay a little more while the state would also cough up some money, and new retirees wouldn't get as much when they retire.
"The people of Montana deserve to have the brightest and best working for them and one of the ways to do that is to provide this kind of benefit to entice those people to come and work for the state of Montana," said Rep. Bill McChesney.
Some conservative lawmakers want to convert new hires to a defined contribution plan. However everyone, new hires and current employees, would all have to invest a little more of their own money, the state would throw in some too and benefits would also be reduced.
"It's doing the best we can to preserve a retirement promise that's been made to them," Rep. Keith Regier (R-Kalispell) said.
While some favor one plan over the other the chairman is convinced one thing is certain.
"Either one go into effect they are probably going to end up at the [Montana] Supreme Court, because we are making reductions and there will be people who will challenge that reduction," Lewis said.
Since both plans were amended in committee on Tuesday, legislative staffers are still calculating the costs of both of them.