Cost-of-living adjustments for Oklahoma public employee plan participants will have to be fully funded by the state before they are distributed under a bill signed on Tuesday by Oklahoma Gov. Mary Fallin.
The law requires the Oklahoma Legislature to fund the COLA adjustments, rather than the current practice of funding them out of the plans’ assets, which has contributed to an aggregate $16.5 billion unfunded liability for six state plans. Historically, the COLAs have increased 2% every two years.
Another law signed by Ms. Fallin increases the retirement age for most new public teachers hired after Nov. 1, 2011, to 65 from 62. It also adjusts the so-called rule of 90 that historically allows teachers to retire once their age plus their number of years of state employment totaled 90 or more. Under the new law, teachers retiring under the rule of 90 must wait at least until age 60 to receive full benefits.
State Rep. Randy McDaniel, a Republican and author of the bills, said in a telephone interview that the COLA law is estimated to reduce the system’s unfunded liability by roughly $5 billion.
“Actuaries estimate that requiring full payment (of the COLAs by the Legislature) will reduce the liability by 25% to 35%,” he said, noting that the state’s retirement systems currently spend about $300 million to $350 million a year on the COLAs.
The retirement age law is projected to save the state about $2 billion over 30 years, Mr. McDaniel said.
“By beginning the reform process today, we are helping to ensure that we don’t one day face a crisis scenario where the state is simply unable to deliver on the benefits we’ve promised our retired workers,” Ms. Fallin said in a news release.