- Associated Press - Tuesday, August 29, 2017

COLUMBIA, S.C. (AP) - Employee advocacy groups need to offer acceptable alternatives to South Carolina’s pension system for public workers, because more changes are necessary to ensure there’s enough money for everyone’s retirement pay, legislators warned Tuesday.

Their directive came after employee representatives urged lawmakers not to abandon the traditional defined benefit system.

A transition would be “unwise and dangerous for state employees and the economy,” as 401(k)-style plans offer no guarantees for retirement, Carlton Washington, director of the State Employees Association, told a House-Senate panel tasked with making recommendations for a third round of changes since 2012.

Deeper benefit cuts also would erase a key reason for taking a public job, making it even harder for agencies to fill vacancies and keep experienced employees, Washington said. He reminded legislators that South Carolina workers already earn less and pay more for benefits than their counterparts in other states, as shown by a state-paid study.

And what happens when qualified people leave public safety jobs, asked Joe Palmer, director of the State Firefighters Association.

“It is of utmost important to have experienced law enforcement,” said Jarrod Bruder, director of the South Carolina Sheriff’s Association. “If your son, daughter or loved one is confronted by a law enforcement officer, what kind of officer do you want us to be able to hire?”

But legislators made clear that the status quo is not an option.

“I encourage all of y’all to help us with this and figure out what would work,” said Rep. Gilda Cobb-Hunter, D-Orangeburg, a long-time advocate of higher pay for state workers. “Unfortunately when the winds of change are upon you, you have to flow with it or get knocked over by it.”

The pension debt grew to more than $20 billion from 1999 to 2016 because of legislative decisions that enhanced benefits, legislative underfunding, investment underperformance and the reality that fewer workers now support more retirees. That liability represents the state investment portfolio’s worth compared with benefits likely owed to all 558,000 people in the system, including workers and retirees, until they die.

Legislators passed a law in April designed to shore up the system by increasing contributions from both workers and their employers starting July 1. While that’s supposed to be the last of six consecutive rate hikes for workers, employers’ rates will rise yearly through 2022.

Employees in the state’s main retirement plan now contribute 9 percent of their salaries toward pensions, while officers and firefighters in the smaller law enforcement plan contribute 9.75 percent.

Their taxpayer-supported employers will cumulatively put an additional $3 billion into the system over the next six years. Once the hikes are fully phased in, employers will contribute $827 million more into the system annually than they did before the law.

How that law affects the projected unfunded liability has not yet been calculated.

Last week, the state’s investment agency announced the portfolio earned a nearly 12 percent return in the fiscal year ending June 30. That’s significantly higher than recent years, thanks partly to a roll out of investment changes. That too could impact the debt.

Gov. Henry McMaster said the state must uphold its commitment to the 12 percent of South Carolinians who rely on the state pension system while also protecting taxpayers from further hikes. In a letter sent to legislators ahead of Tuesday’s meeting, he asked them to consider setting a date for moving newly hired employees to a defined contribution plan, such as 401(k) retirement accounts.

Other changes, he said, could include limiting the new system to state employees.

Currently, less than 40 percent of employees in the pension system work for the state. The hundreds of other employers include city and county governments, public utilities, colleges, and hospitals.

McMaster’s letter repeated what he said in April, when he signed the law but complained it didn’t go far enough.

Sen. Tom Davis faulted McMaster for not vetoing the law.

“That was the leverage to get the plan reform, but he gave it away by failing to veto the bill,” said David, R-Beaufort.

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