OK Pension Commission Recommends Nixing Unfunded COLAs

April 29, 2011 (PLANSPONSOR.com) - The Oklahoma State Pension Commission approved a recommendation that legislators not grant cost-of-living adjustments for state retirees without appropriating money to fund them.

The Oklahoman newspaper said for decades, benefit increases have been granted to members of the retirement systems without those benefits being funded by the Legislature. Just eliminating the assumed 2% cost-of-living raises will save the state’s pension plans $5 billion over 25 to 30 years, said State House Representative Randy McDaniel, a former Pension Commission chairman and author of several bills attempting to make changes to improve the pension systems, according to the news report.   

The unfunded liability of the state’s pension systems stands at $16.5 billion, more than twice the amount of the entire state budget. Ten years ago the unfunded liability was just over $6 billion.  

House Bill 2132, which would require legislators to find a way to pay for cost-of-living adjustment increases for those on the state’s pension system before approving them, is awaiting action in the House of Representatives.   

The Oklahoman said the Pension Commission also voted to recommend lawmakers pass measures to establish a minimum age of 65 for retirement eligibility for all new public employees, except public safety workers. This would also apply to all elected officials.   

Other suggestions include dedicating a portion of future surplus revenues and one-time funds to the pension systems and increasing the final average salary period for calculating benefit payments from three years to five.