S.C. lawmakers will consider more changes to the state’s retirement benefits starting Tuesday.
That’s when a joint S.C. House and Senate panel will start the second phase of deciding how to reform the state’s pension system.
Earlier this year, that same panel completed phase 1, raising the amount that state workers and their employers – state agencies, local governments and school systems – pay into the retirement system.
The S.C. Retirement System pays pension benefits to state workers, local government workers and teachers. Another pension system, the Police Officer Retirement System, pays pension benefits to law enforcement officers.
The problem is that together, the two systems have promised about $20 billion in benefits above the value of the assets they have on hand to pay for those benefits.
What should state workers, teachers and taxpayers expect when legislators gather Tuesday? Here are some commonly asked questions.
Will current S.C. workers and teachers in the pension system see their benefits go away?
No. S.C. lawmakers guarantee that roughly 220,000 employees currently paying into the S.C. Retirement System or S.C. Police Officers Retirement System will get their pension benefit when they retire.
“These are people who’ve made a commitment to us,” said state Sen. Darrell Jackson, D-Richland, whose district includes many state workers.
Government workers spend their careers helping S.C. citizens, Jackson said. “We have to honor that commitment that we have made to them.”
Will S.C. workers and teachers pay more for their pensions?
On July 1, S.C. workers and teachers began contributing 9 percent of their pay to the S.C. Retirement System. Police officers began contributing 9.75 percent. That means workers pay $9 – or $9.75 – into the retirement system for every $100 they earn.
The new pension law capped those rates, guaranteeing that S.C. workers will not have to contribute at a higher rate.
Still, S.C. public-sector workers pay far more of their salaries into the pension system than do their counterparts elsewhere. Nationally, the median contribution rate was 6 percent in 2015, according to the National Association of State Retirement Systems.
What will retirement plans look like for new workers?
There could a shift toward a defined contribution plan – a 401(k)-style plan that puts more responsibility for retirement planning on state workers. That could happen because many Republicans, who control the Legislature, say the pension system is outdated and should be abolished.
But that would be expensive. The state would have to come up with the money to pay the benefits due its roughly 150,000 retirees without using some of the money now being paid into the system by 220,000 active public-sector workers.
There also could be a hybrid plan that combines both 401(k) and pension features.
Will I pay more in taxes or tuition as a result?
The law already passed this year requires cities, counties, schools and other S.C. government entities to pay $13.56 into the S.C. Retirement System for every $100 that an employee makes. This year, the General Assembly agreed to help pay part of that higher cost to ease the hit on local governments and schools.
That cost will rise to $18.56 over five years, costing those governments – and their taxpayers – $827 million more a year in higher pension costs.
Local governments could get hit hard. “I would not be surprised if many governing jurisdictions are required to raise taxes,” said Tim Winslow of the S.C. Association of Counties.
Other state institutions, including colleges and universities, could pass their higher costs on to their customers, too. For example, the University of South Carolina cited higher pension costs as part of its reason to raise tuition this year.
SC pension plans
190,923 active members — including S.C. teachers, city and county workers — now are paying into the S.C. retirement system
26,651 active law enforcement members are paying into the separate Police Officers Retirement System
150,000 retirees or their beneficiaries are collecting benefits from the pension systems
$20,068 average annual benefit for a retired S.C. teacher or government worker
$20,007 average annual benefit for a retired law enforcement officer
SOURCE: Public Employee Benefit Authority