GOP leaders looking at 401(k)-style retirement plans for Ohio workers

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401(k)-style retirement plans for Ohio workers on the table, GOP leaders say

Cincinnati.com
March 10, 2011

COLUMBUS - Ohio's GOP legislative leaders say a 401(k)-style retirement plan may be on the table for new public employees, although it is not currently in the pending pension reform legislation.

The General Assembly is considering an overhaul to Ohio's five public retirement systems. A House committee is holding hearings on the legislation.

House Speaker Bill Batchelder, R-Medina, and Senate President Tom Niehaus, R-New Richmond, say they are open to moving new hires from the current defined-benefit plan to a defined-contribution plan. Ohio's legislative leadership spoke on a panel Thursday at the annual legislative session sponsored by The Associated Press.

In a defined-benefit plan, public employees and their employers contribute a certain percentage of their salary throughout their career, and then they are guaranteed benefits for as long as they live after retirement. In a defined-contribution plan, employees have their own investment accounts which they tap into once they retire. Benefits end once the money runs out.

Both Batchelder and Niehaus said it is a priority to maintain the current benefit structure for those currently paying into the retirement systems.

Three of Ohio's five public pension funds lack the assets to cover 30 years of liabilities as required by state law. Those systems must present a plan to the Legislature to bring their funding back in line.

Given the economy and the longer lifespan of the average worker draining each of the funds, Ohio lawmakers have asked all pension funds to come up with reforms.

"We have been working on it, but it's not something that we can handle quickly," Batchelder said.

Pension reform is complex, so it likely won't come before the full Legislature until the end of session, Batchelder said.

Senate Minority Leader Capri Cafaro, D-Warren, said she has concerns about the way the current House bill is being handled. All five pension systems are being addressed in a single bill, although the bill has different provisions for each system. She said each pension system has a different dynamic, therefore should be considered separately.

A defined contribution plan might be more difficult for some public employees than others, she said, hence the need to consider the systems separately. Employees in the School Employees Retirement System, who typically work for lower wages, may not have the means to pay into a 401(k)-style plan, she said.

Cafaro also noted that Ohio public employees do not pay into Social Security, therefore cannot participate in the program once they retire.