S.C. state worker’s pension contributions soon could be increased to 9 percent of their pay — and capped, for the foreseeable future.
The move comes as a panel of S.C. House and Senate members kicked off the legislative session Tuesday by working to draft a bill to fix the state’s ailing system.
That pension system has roughly $20 billion in unfunded obligations — retirement benefits promised to current state and local government workers, including teachers, and retirees.
“We’re going to have to infuse a large amount of money into (the S.C. retirement) system one way or another,” said state Sen. Kevin Bryant, R-Anderson, who co-chairs the pension panel.
To begin addressing that $20 billion gap, lawmakers agreed Tuesday to include in a bill:
▪ Setting employee contributions to the state retirement system at 9 percent for the foreseeable future. Those contributions — now 8.66 percent — were set to increase to 9.2 percent of a worker’s pay check on July 1 if lawmakers do not act.
▪ Setting — and capping — law enforcement officers contributions in their retirement system at 9.75 percent of their salaries.
▪ Preserving the annual 1 percent cost-of-living increase, now capped at $500, promised to retirees.
▪ Allowing the contributions paid into the pension system by public-sector employers — including state agencies, local governments and school systems — to increase without an equal increase in the amounts paid into the system by employees. Currently, state agencies pay 11.56 percent of an employee’s salary into the pension system.
▪ Reducing the assumed rate of return on the pension system’s investments to 7 percent, down from 7.5 percent. That cost of that move — assuming the pension system’s assets will earn less — is roughly $140 million. Starting in 2021, the Public Employee Benefit Authority could change that assumed rate of return, but the General Assembly could reject the change.
The state’s pension system is underfunded because its assets have earned less than expected. The system also has suffered from high fees charged to manage its investments.
Also, S.C. government employs 8,000 fewer workers than it did two decades ago, meaning there are fewer state workers paying into the pension system.
State Rep. Gilda Cobb-Hunter, D-Orangeburg, said Tuesday that hiring more state employees and paying them more would increase the assets in the pension system.
But State Rep. Jeff Bradley, R-Beaufort, countered that having more state employees also would increase the amount the state owes in benefits.
S.C. Treasurer Loftis removed from pension system’s oversight
A House-Senate panel tasked with addressing the state’s ailing pension system Tuesday approved limiting S.C. Treasurer Curtis Loftis’ involvement in that system.
Loftis, who long has railed against the pension system’s failings, ripped the move, saying legislators were putting oversight of the system in the hands of those who have piled up billions of dollars in unfunded liabilities.
However, legislators moved to strip Loftis of his direct involvement in the pension system.
“I’m just not comfortable with one person (Loftis) in charge of a $29 billion banking relationship,” said state Sen. Kevin Bryant, R-Anderson, who co-chairs the panel.
“I think the Ethics Commission would agree with me on that,” Bryant said, referencing state ethics officials’ recent reprimand of Loftis for influencing the selection of a longtime friend to receive $2 million in legal work from the state.
The panel approved barring Loftis from appointing himself to Retirement System Investment Commission. Instead, Loftis only could appoint a representative to the commission, which oversees the pension system’s investments.
Lawmakers also approved removing the State Fiscal Accountability Authority, of which Loftis is a member, as a co-trustee of the retirement system’s assets, leaving the Investment Commission and Public Employee Benefit Authority as co-trustees. They also approved removing the treasurer as custodian of the retirement system’s assets.
Loftis is a long-time critic of the pension system’s management, saying it has — for example — paid too much in fees to manage its investments.
“I have opposed the inefficient and money losing pension system at every turn, but that work has been ignored,” Loftis said in a statement Tuesday. “Now, the joint committee has entrusted the sole oversight of the pension system to the very agencies that have placed $25 billion dollars of debt on the backs of the hardworking taxpayers and public service employees.”