Pension reform legislation that will raise employer and employee contributions and lower the annual assumed rate of return of the $28.8 billion South Carolina Retirement Systems was passed by the state Legislature on Wednesday.
If signed by South Carolina Gov. Henry McMaster, the new law, effective July 1, 2017, would increase the employer contributions to the state pension fund 2 percentage points to 13.56%. For employers contributing to the Police Officers Retirement System, the 2 percentage point increase will raise the contribution rate to 16.24%. Both employer contribution rates will increase after fiscal year 2018 by an additional 1 percentage point per year through the end of the 2023 fiscal year.
The law also increases and caps employee contributions to the South Carolina Retirement Systems through FY 2023 to 9% from 8.66% and to 9.75% from 9.24% for employees contributing to the police plan. The police plan represents $3.9 billion of total SCRS assets.
The pension plan's assumed rate of return will be lowered to 7.25% from 7.5%. After 2021, the law stipulates that the assumed rate of return will be set every four years by the board of the South Carolina Public Employee Benefit Authority, which manages the pension plan, the actuary and the South Carolina Retirement System Investment Commission, which manages the plan's assets.
Among other measures, the bill would:
- move custody of SCRS assets to the investment commission with oversight by the PEBA board from the office of the state treasurer;
- alter the amortization period for reducing SCRS' unfunded liability ($45.4 billion as of June 30) to 20 years from 30 years over the next 10 years; and
- increase the number of RSIC commissioners to eight from seven, making PEBA's executive director a non-voting member.
Brian Symmes, the governor's press secretary, did not return a call seeking information about the governor's intention regarding ratification of the legislation.