A Texas Senate bill that would create an optional defined contribution...

A Texas Senate bill that would create an optional defined contribution plan for state workers has gone through committee and is now on the Senate’s intent calendar. If the bill passes the state legislature by May 30, when the current legislative session is scheduled to end, it will — by Sept. 1, 2000 — allow state workers to choose whether to participate in the Employees Retirement System of Texas or the optional defined contribution plan within 90 days of employment or the date the defined contribution plan is available. Under the legislation, the combined state and member contribution rate would remain at 12% and would remain equal to the contribution rate to the existing pension plan, according to the bill’s fiscal note. But the cost of implementing the new system would increase the normal cost of the state’s defined benefit plan to 12.64% from 11.86%, thereby reducing the pension plan’s current actuarial surplus of $1.6 billion, the note states. In order to prevent an unfunded liability, the fiscal note suggests the state contributions eventually be increased, at a cost of at least $17 million annually to the defined benefit plan and $13 million to the defined contribution plan.