- Associated Press - Wednesday, September 2, 2015

SIOUX FALLS, S.D. (AP) - The normal retirement age for many new public workers would increase two years to 67 under a proposal state lawmakers may consider in the upcoming legislative session.

The South Dakota Retirement System’s governing board voted Wednesday to draft the new plan. If approved in December, it would go before lawmakers for their consideration during the 2016 session. The measure is intended to maintain the sustainability of the South Dakota retirement system, which currently serves nearly 80,000 members, into the future.

“People are living longer, they’re going to stay in retirement longer,” said Paul Schrader, a consultant for the retirement system. “These systems are going to be increasingly more expensive.”

South Dakota’s fully funded retirement system had $10.8 billion in assets at the end of fiscal year 2015, and investment income grew at more than 4 percent during that time, which is about 2 percentage points above benchmark. Returns in recent years have varied from nearly 19 percent in fiscal year 2014 to about 2 percent in fiscal year 2012.

But State Investment Officer Matt Clark said more challenging economic times could be ahead.



The new plan under discussion would apply to public employees who are hired after it goes into effect, not current or retired employees. It’s currently unclear when the new plan would begin.

“No one currently employed will be affected by this. No one who is retired will be affected by this,” Lt. Gov. Matt Michels said at the Wednesday meeting, adding that the changes represent “stewardship” meant to maintain the system for future beneficiaries.

The normal retirement age increase for new public safety officials such as police officers and state troopers would also jump two years to 57 under the proposal.

The changes would remove system subsidies for early retirement, which would still be an option for members, to pay for an increase in base benefits for a broad class of public employees that includes teachers and city and county workers.

The new plan would have a cost-of-living adjustment floor of 1 percent compared to the current minimum for members of 2.1 percent, and both would share a maximum of 3.1 percent.

But the new proposal also includes benefits tied to the return on the system’s investments. The benefits based on investment returns are intended to give the system more cushion in difficult economic situations because the system’s financial responsibilities aren’t fixed when assets fall in value.

“The changes will help us kind of manage through future difficult environments,” Clark said.

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This version of the story corrects the reference in fourth paragraph to percentage points from percent.

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