A proposed bill that intends to overhaul the Teachers Retirement System of Georgia is drawing fire from teachers, but praise from a Georgia conservative think tank.
“Overall, this bill represents a significant reduction in benefits for anyone participating in the new plan,” according to a post on the Professional Association of Georgia Educators web page.
The Georgia Association of Educators warned that those reduced benefits might drive more teachers out of the profession.
But the proposed changes are in line with recommendations the Georgia Public Policy Foundation made last year.
The amount the state must pay into each teacher’s retirement plan remains on the rise, according to the foundation’s analysis. The bill “would modernize Georgia teachers’ pensions to be more in line with private-sector retirement plans,” according to a foundation press release. “The proposal is modeled after the successful reform of Georgia’s pension plan for new state employees seven years ago.”
The costs of retiree benefits are going up fast, the foundation warned in a 2014 report.
“The required taxpayer-funded employer contributions to Georgia’s two major retirement systems, the Employees Retirement System and the Teachers Retirement System have been growing at an alarming rate in recent years. The increases are expected to continue,” according to the report. “Compared to other states’ plans, while not extravagant, the ERS and the TRS are relatively rich in overall benefits provided relative to required employee contributions.”
Multiple studies note that government employees receive greater compensation than their counterparts in the private sector, and almost all studies show government employees enjoy greater job security, according to the foundation report.
Still, GAE counters, the Teachers Retirement System of Georgia is one of the nation’s most financially sound and doesn’t need fixing.
The University of Georgia Staff Council discussed the bill during a question-and-answer session with UGA President Jere Morehead on Wednesday.
The Staff Council is an elected body that represents the interests of non-faculty workers on the campus. Many had just learned about the new legislation, but said they didn’t yet understand its implications
Morehead said he intended to learn more about the bill sponsored by three Atlanta area state senators ‑ Hunter Hill, Fran Millar and Curt Thomson.
Numerous faculty working at UGA in the 1980s chose to opt out of the TRS for the so-called Optional Retirement Plan, or ORP, similar to a 401(k) plan, Morehead said. But many regretted it later as the value of their retirement nest eggs declined steeply in the recent recession.
The TRS is a defined-benefit plan in which retirees’ retirement pay is based on a formula that takes into account their highest earning years plus their length of employment. The ORP is a defined contribution plan in which an employee puts money into investment funds, with the University System of Georgia matching a part of those contributions.
Senate Bill 152 would create a kind of hybrid retirement plan that would be part defined-benefit, part defined-contribution. Teachers and others in jobs covered by the TRS who become eligible on or after Jan. 1, 2017, would be automatically enrolled in the new plan. People already enrolled in the TRS would have the choice of staying in their existing plan or joining the new one.
In the new plan, workers’ retirement pay would be 1 percent of their the highest average salary over a 24-month period times their years of service. To fund the defined-benefit part, employees would contribute 5 to 6 percent of their salaries.
But school and college workers could also build up retirement savings in a 401(k) plan. Workers would choose the amount they pay into the plan, with a default rate of 5 percent that employees could adjust up or down. They could also choose to contribute nothing, according to a PAGE analysis of the legislation.
The state would match the first 1 percent employees pay in, then match half of additional amounts employees pay. The state’s contribution to the 401(k) plan would be capped at 2 percent.
The bill would also limit worker’s ability to transfer retirement credit into the TRS, such as when teachers move to Georgia after working in another state, according to a PAGE analysis of SB 152. Instead, only certain kinds of military veterans and employees enrolled in the retirement system for non-education workers, the ERS, would be eligible to transfer credit in.
Some provisions of the bill are unclear, such as whether members can take money out of their 401(k) plans while still working in a TRS-covered job, according to PAGE’s analysis. Because of Georgia General Assembly rules about legislation affecting pensions, legislators can’t vote on the bill until next year.
Source: Athens Banner-Herald