Alabama Legislature

Bills for More Generous RSA Pension Benefits in Committees Wednesday, Lawmakers Want to Know Impact to State

Members of the Alabama House of Representatives Meet in the Statehouse. (Source: Alabama Legislature)

MONTGOMERY — Legislation being considered in the Alabama State House could offer better retirement benefits to public school teachers and many city and county government employees as well.

In 2013, the Legislature created a Tier II-level of benefits for newly hired state employees within the Retirement Systems of Alabama as a cost-saving measure for the state. Unlike Tier I employees, Tier II employees can’t retire at any age after 25 years of service but must wait until they’re 62 to begin drawing benefits. Their retirement benefits are also less than those of Tier I employees. Local governments who participate in RSA had to also adopt the Tier II for new employees.

Senate President Pro Tem Del Marsh, R-Anniston, said any possible changes to pension plans will be based on one question: Can the state afford them?

“We made these changes, basically, because it was getting too expensive for the state,” Marsh said Tuesday. “So you have to step back and ask what’s changed from back then to now to have an effect on the overall budgets.”

House Bill 61 would let cities and counties opt back into Tier I. Those local governments, not the state, would pay the additional cost.

Bill sponsor Rep. Nathaniel Ledbetter, R-Rainsville, said the bill is particularly important for law enforcement, firefighters and other first responders.

“The strenuous nature of the job, it’s tough to keep people to the age of 62,” Ledbetter, the House Majority Leader, said this week.

His bill is expected to be discussed in the House State Government Committee Wednesday afternoon.

“The Tier II benefits are just not as attractive as (Tier I) and it’s a recruitment issue for us,” said Sonny Brasfield, executive director of the Association of County Commissions of Alabama.

As of 2017, there were more current city and county government employees, 56,109, than state employees, 28,926, in RSA, according to the systems. Brasfield said local governments didn’t have a say in the 2013 change, and this gives them back local control at no cost to the state.

There are more than 900 local governments and agencies participating in RSA.

State employees’ average salaries were slightly higher than local government employees’ in 2017, $43,963 compared to $40,504, according to RSA.

Neah Scott, legislative counsel for RSA, said the organization is neutral on HB61.

Greg Cochran, deputy director of the Alabama League of Municipalities, said the enhanced benefits would be a recruitment tool.

“It is harder in a tight job market to get those (employees) to come to a city,” Cochran said.

Ledbetter sponsored the same bill in the 2018 legislative session. It died without a vote in the Senate. He said there was some concern about whether state employees would want the same changes to their benefits.

A Senate version of the bill, SB147, is also expected to be discussed in the Senate Fiscal Responsibility and Economic Development Committee today. It’s sponsored by Sen. Jabo Waggoner, R-Vestavia Hills. He’s the Senate Rules chairman and decides what bills could receive votes on a given day.

Waggoner did not return calls for comment.

“I think now it will move farther down the road and they see it doesn’t have anything to do with state employees,” Ledbetter said. “This is a city county issue and one we hope to resolve this year.”

Although none of the proposed legislation would apply to non-education state employees, advocates are hoping that will change.

“We believe a solution that does not include state employees is not fair,” said Mac McArthur, executive director of the Alabama State Employees Association. “We think there ought to be an across-the-board solution and that’s what we’re working toward.”

School Employees

House Bill 77 by Rep. Alan Baker, R-Brewton, creates a “Tier III” plan for education employees and allows them to retire after 30 years of service.

The bill also increases the benefit multiplier, which determines how much retirees earn, from Tier II’s current 1.65 percent to 2 percent. Enrollees in the new plan would contribute 1.5 percent more of their pay to their retirement than Tier II members do.

A fiscal note on the bill says it would increase the total employer contributions by an estimated $16.7 million for fiscal year 2020, with approximately $9.8 million being paid from the education budget.

Baker’s bill is scheduled to be the subject of a public hearing in the House education budget committee Wednesday. Various education groups in recent months have said teachers’ retirements need to be improved to attract more young educators to the profession and help correct a teacher shortage.

Committee chairman Rep. BIll Poole, R-Tuscaloosa, said he would not call for a vote on the bill Wednesday, but will begin a discussion of whether and why changes may be needed.

“There’s been a lot of discussion in the education community about the Tier II benefit level, and this is a good opportunity for the committee to hear those concerns and listen to the proposal that Rep. Baker is making,” Poole said. “Do we need to make some adjustments here, or don’t we, and why?”

Poole said he didn’t yet have a stance on what is a complex issue.

Health of the Pension System

As recently at 2016, some lawmakers were discussing possible, significant changes to public employees’ retirement plans, including moving to 401K-style plans. Their concern has been the system’s billions in unfunded liabilities and the state’s annual cost. Legislators were told the creation of Tier II made the pension system more stable.

As of 2017, the Employees’ Retirement System is 67.8 percent funded and the Teachers’ Retirement System is 68.9 percent funded, Scott said.

“Let’s get it back on its feet and then we can do things,” Rep. Lynn Greer, R-Rogersville, said Tuesday about the new bills.

“We have a long ways to go to get our RSA back (better than 68 and 69 percent),” Greer said. “If the Legislature would back off, (RSA chief David) Bronner and his people could fix it.”

Alabama Daily News reporters Caroline Beck and Todd Stacy contributed to this report.

(Correction:  A proposed bill to create a new tier of retirement benefits for Alabama teachers would require that they conribute 1.5 percent of their pay to their retirements than new enrollees currently contribute.  The percentage was incorrect in a story published Wednesday.) 

This coverage of the 2019 session of the Alabama Legislature is provided by the Capitol News Service of Alabama Daily News, based in Montgomery. BirminghamWatch is publishing reporters’ news and analysis but not commentary, from this new partner.