Connecticut Gov. M. Jodi Rell proposed creating a defined contribution plan for new state employees among other efforts to help the state cope with $34 billion in unfunded pension and retiree health benefits liabilities, confirmed Rich Harris, a spokesman for Ms. Rell.
The proposals would affect the six state pension plans and eight state trust funds in the $22.8 billion Connecticut Retirement Plans and Trust Funds, Hartford. State Treasurer Denise L. Nappier is the funds' principal fiduciary.
Ms. Rell asked the state's Post-Employment Benefits Commission, an advisory group created by executive order in February, to support her proposals to deal with about $9 billion in unfunded pension liabilities and $25 billion in unfunded retiree health benefits, according to a news release from her office issued Sept. 7.
In a separate release issued a day later, Ms. Rell said several pension-related and health-related changes could save the state more than $300 million a year. Other changes “would have about $3 billion in longer-term effects,” the news release said. “Savings from still others cannot — yet — be calculated.”
Among the changes: Requiring an average 3% increase in employee contributions to pensions, raising the normal retirement age to 65 from 62, capping per-person pension payments at $100,000 a year and calculating for pension purposes a retiree's average salary over the final five years of employment, instead of the current three years.
“There are no magic ways to eliminate a $34 billion problem at a stroke — this is a problem that has developed over decades and it will take years of concentrated effort to resolve it,” Ms. Rell said in her latest news release.
The governor didn't offer details about creating a DC plan for new state employees. The state now offers a 457 plan for state government employees and legislators as well as a 403(b) plan for employees of state educational institutions and hospitals.
In her own news release on Sept. 7, Ms. Nappier said Ms. Rell's remarks were similar to those made by a top official of the state's Office of Policy and Management at a recent meeting of the Post-Employment Benefits Commission. OPM provides information and analysis to the governor on public policy issues.
At that time, the OPM official “was asked to provide a detailed cost savings analysis of each of the items,” Ms. Nappier said in her release, which was posted on her office's website. “To date, we have not seen that.”
Christine Shaw, director of government relations for the treasurer's office, confirmed Ms. Nappier's comments, which were sent as a letter to the governor.
Ms. Nappier said that of $9.3 billion in unfunded pension liabilities, “almost $7 billion is attributable to employees hired before July 1, 1984.”
She asked that the Post-Employment Benefits Commission refrain from acting on Ms. Rell's proposals until the “appropriate analysis” can be done. n