Montana legislative committee to vote on pension proposals next week

2013-03-05T19:30:00Z 2013-03-06T11:19:58Z Montana legislative committee to vote on pension proposals next week

HELENA – With deadlines fast approaching, the Joint Select Committee on Pensions intends to vote on the major pension bills on March 12, its chairman said Tuesday.

What the 12-member committee – comprising eight Republicans and four Democrats – will do is anybody’s guess as it tries to figure out ways to deal with the funds combined potential shortfalls of $4.3 billion.

“Right now, I don’t feel a consensus,” the committee chairman, Sen. Dave Lewis, R-Helena, said after the meeting.

Lewis said he realizes there are serious disagreements among committee members over what to do.

“We can’t just ignore this,” he said. “It’s a huge liability for taxpayers.“

Lewis said the major bills that the committee will act on next week include:

• House Bill 338 by Rep. Keith Regier, R-Kalispell, to close to future employees the current defined benefit pension plans, which guarantee fixed pensions to retired employees based on their years of employment and the average of their highest years of salaries. The bill would put them instead in a defined contribution plan, which is similar to a 401(k) plan. Contribution rates would be increased in certain plans until the plans are funded. The plans would get appropriations from coal severance tax revenues and the general funds to pay their unfunded liabilities.

• HB454 by Rep. Bill McChesney, D-Miles City, on behalf of Gov. Steve Bullock, which would amortize the unfunded liabilities of the Public Employees Retirement System and maintain the current defined benefits plan. It would do it through increased contributions by employees and employers and revenue, until a trigger is hit, and interest earnings from natural resource industries. The retirement system and public employee unions support this plan.

• HB377 by Rep. Tom Woods, D-Bozeman, on behalf of Bullock, which would amortize the unfunded liabilities of the Teachers’ Retirement System by putting in additional funding from state natural resources revenues and a one-time only deposit of school reserve funds. Active members would contribute more. This bill is supported by education groups and unions.

• SB333 by Rep. Ron Arthun, R-Wilsall, to put all new public employees in a cash-balance plan, which he called a hybrid between a defined benefit and defined contribution plan.

Arthun presented his bill Tuesday to the Joint Select Committee on Pensions.

No one testified in support of it, while 12 people representing public employee unions, the pension plans, education groups and others opposed it.

Kansas and Louisiana adopted cash balance plans in 2012, Arthun said, while Kentucky also is looking at one.

Under the plan, Arthun said each employee would be provided with an account, with the retirement system keeping track of each employee’s account balance, but all investments would be pooled into a single fund.

An employee isn’t vested until five years. Up until that point, the member puts in his contribution rate (7.15 percent for TRS) and (7.9 percent for PERS).

A member’s vested cash balance would be the member’s accumulated contributions, plus a percentage of a matching amount paid by the system based on an employee’s years of service. For five years, it would be 50 percent, six years it would be 60 percent and so on until reaching 10 years or more and it would be a 100 percent match.

The plan would provide a guaranteed return of 4.5 percent.

When an employee retires, he would be eligible for a lifetime annuity calculated by the system actuaries based on the account balance then.

Arthun said the plan is predictable, affordable, shelters the employer from much of the risk, eliminates abuses and provides employees with a portable plan.

In opposing the bill, David Senn, executive director of the state Teachers Retirement System, said SB 333 “doesn’t do a lot of things.”

The bill doesn’t address the unfunded liability but significantly reduces the benefit for new hires, Senn said.

It also fails to provide a cost of living increase for retired employees and promotes and rewards employee turnover, he said.

Missoulian State Bureau reporter Charles S. Johnson can be reached at (406) 447-4066 or by email at

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(1) Comments

  1. Al Moncrief
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    Al Moncrief - March 07, 2013 12:43 pm

    The Colorado Court of Appeals has reversed and remanded an initial District Court ruling that denied the contractual status of public pension COLAs in Colorado. The Court of Appeals confirmed that Colorado PERA pension COLA benefits are a contractual obligation of the pension plan Colorado PERA and its affiliated public employers. A huge victory for public sector retirees in Colorado! The Colorado Legislature may not breach its contracts and push taxpayer obligations onto the backs of a small group of elderly pensioners.

    The lawsuit is continuing. Support pension rights in the U.S. by contributing at Friend Save Pera Cola on Facebook!

    In 1977, the U.S. Supreme Court (in U.S. Trust Co, 431 U.S.) clarified that state attempts to impair their own contracts, ESPECIALLY FINANCIAL OBLIGATIONS, were subject to greater scrutiny and very little deference because the STATE'S SELF-INTEREST IS AT STAKE. As the court bluntly stated:

    “A governmental entity can always find a use for extra money, especially when taxes do not have to be raised. If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all . . . Thus, a state cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote the public good rather than the private welfare of its creditors."

    For more resources to protect public pension benefits visit
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