A controversial Republican-backed bill that significantly changes Nevada’s Public Employees’ Retirement System is working its way through the Legislature.
The bill would add to Nevada PERS a defined contribution option – or payouts based on how much money employees contribute. The existing plan promises employees a specific payout upon retirement.
Why the proposed change? Assemblyman Randy Kirner, R-Reno, says there is a need to tackle an unfunded liability that sits at $12.5 billion.
“The motivation for this bill comes from a number of what I call red flag indicators,” Kirner told KNPR’s State of Nevada. “(From) 2000 to 2014, the unfunded liability has not doubled, has not tripled, not quadrupled, but in fact has grown five times from a little over $2 billion to $12.5 billion.”
But not everyone is supportive of the change.
“Chiefly, the increase in the unfunded liabilities are a result of the market declines that occurred in 2001-2002 and again in 2008 and 2009,” Keith Brainard, research director with the National Association of State Retirement Administrators, told KNPR’s State of Nevada on Monday. “The $12.5 billion liability is going to be paid off over the next 20 to 30 years.”
Brainard said what Kirner didn’t mention was that “employees in Nevada are paying half the cost” of that liability. He said as the cost of the benefit is rising, employees are kicking in a good portion of that amount.
Kirner said that kind of pace of liability growth spells trouble. He also noted that total benefit payouts over the same period have risen from $421 million to $1.8 billion.
“Are we going to have the funds available to take care of our current participants and then future participants,” Kirner asked.
Brainard said to insinuate that Nevada PERS is going to be insolvent, “that’s not going to happen.”
Public Employees’ Retirement Systems chief Tina Lewis was unavailable for comment Monday. Lewis told the Associated Press she has a number of concerns about the bill, including the plan to circumvent the power of the system’s governing board, which might violate the Nevada constitution.
Nevada PERS recently issued a fiscal note on Kirner’s bill, finding that switching future hires to a mostly defined-contribution plan will cost about $800 million. The cost is estimated at $790 million in the second year and $750 million in future years.
Kirner told KNPR he is not convinced that the cost projections are realistic.
“If we have learned anything over the last 30 years is that on your own retirement planning doesn’t work very well,” Brainard said.
Assemblyman Randy Kirner, R-Reno; Keith Brainard, research director, National Association of State Retirement Administrators
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