State wants new hires to pony up contributions to their pension plans

Sunday, April 14, 2013 at 10:05pm

With many states struggling to set aside enough money to follow through on their pension promises to government employees, Tennessee officials have decided it’s time to revise the pension plan here.

State lawmakers appear to be on board with launching a plan that creates a hybrid between the state’s current plan that features a defined benefit with one that requires more people to contribute to their eventual retirement, reducing government costs and unfunded pension liabilities.

The plan comes from the offices of Treasurer David Lillard, a numbers guy who has spent the past year drafting potential changes to the Tennessee Consolidated Retirement System.

Under the current system, state employees, workers at higher educational institutions and teachers can now calculate their retirement payout by multiplying he number of years on the job by their average salary over their five highest-paid years by a multiplier of 1.575 percent. K-12 teachers also contribute 5 percent of their salary to the pool.

The new system folds in a defined contribution element. The multiplier would change to 1 percent, and workers would make up the rest through aligning with state investments or use programs like a 401(k).

Under the changes, employees would largely have to wait until 65 to cash in on their benefits, or until their total years of service added to their age equals at least 90. Currently, retirement benefits can kick in after 30 years of service or after the worker reaches age 60, although the timeline is shorter for public safety workers.

The “Hybrid Retirement Plan for State Employees and Teachers” is aimed at new employees hired after June 30, 2014 — meaning the 122,000 current retirees and the 217,000 public employees now in line for pension benefits are grandfathered into the current system. Local governments can also opt into the plan for new hires.

Compared to other states, Tennessee is in good shape on the pension front. A study by the Pew Center found a $1.38 trillion gap across the country between promises of a pension and the money states have put away to pay those bills in 2010.

The system in Tennessee was 90 percent funded that year, well above an 80 percent threshold used to determine whether programs are fiscally sustainable. Wisconsin was the only state to fully fund its pension plan in 2010, and almost three dozen states fell below the 80 percent threshold.

The cost to taxpayers for supporting government employee pensions is on the rise, according to the treasurer’s office. Taxpayers were spending about $264 million a year to support the system a decade ago, which has since climbed to $731 million last year.

“Based on projections we have seen, the cost could go up by one-third or more over the next 10 years if changes aren’t made, which would push the taxpayers’ total annual expense above $1 billion,” Lillard said.

The pension changes are popular on Capitol Hill, so far. The governor’s office is comfortable with the bill, and the Senate voted almost unanimously this month to usher in the new program. Sen. Thelma Harper — a Nashville Democrat representing large swaths of North Nashville and downtown — cast the lone vote against the plan in her chamber.

As of press time, the House was expected to follow suit, although there will likely be more opposition from Democrats, who argue the changes are premature.

“I don’t see the need for it at this stage of the game,” said House Minority Leader Craig Fitzhugh (D-Ripley) who argues the current pension system is on solid financial ground.

“I’m concerned about the quality of our workforce that we’ll get in the future. Especially with teachers, because teachers generally don’t do it for the pay. They do it for a lifetime, and I think we should give them the expectation of having a certain sum of money available for them to sustain them when they retire,” said Fitzhugh.

His problem is similar to big-picture concerns Gov. Bill Haslam and his department commissioners have voiced in the past: that state government is something of a training ground that loses quality employees lured to the private sector with attractive financial incentives.

“If you start diminishing the value of the pension system and have not yet fixed the low salaries, you’re going to have a hard time bringing in the best people,” said Robert O’Connell, executive director of the Tennessee State Employees Association.

Representing some 40,000 state employees — with almost 14,000 dues-paying members — the TSEA is opposed to the bill, although the treasurer has edited parts of it to make the plan more pleasing to the group, said O’Connell.

“We can’t say his plan is awful,” he said, “but we’re really given heartburn by some aspects of it.”

“We would have liked to continue forever to tell state employees this certain sum is what you can expect to receive as a benefit when they retire after 30 years, but we can’t do that anymore,” said O’Connell.


25 Comments on this post:

By: Loner on 4/15/13 at 6:39

Good morning, Nashville.

This is just more anti-worker legislation concocted by the labor-loathing Tea-Baggers in the state government. Since TN's retirement system is well-supported financially, over 90%, (80% is considered adequate), this move is not being motivated by is being motivated by greed.....and just plain Southern meanness,

Once again, unionized public school teachers are in the cross-hairs, as the backwoods legislature tries to make Right-To-Fire Tennessee as unattractive to workers as possible.

The Idea of a Do-It-Yourself pension plan, for state workers, is the latest hair-brained scheme to come out of the TN state's as if Ebeneezer Scrooge was the emperor of Tennessee.

The South enjoyed free slave labor for hundreds of years; after a deal like that, Southerners will never want to pay anybody a fair wage for their labor....this contempt for a man's honest labor is ingrained in the Southern culture.

You get what you pay for.....and the special interests are getting their money's worth.

By: nashville_bound on 4/15/13 at 6:59

If being a Tennessee State taxpayer means I am a special interest then yes, I am getting my money's worth from this legislature. If it makes me a greedy taxpayer to not want to fund pensions of state employees that have better terms than most private sector employees then yes, I am a greedy. Ha

You are not 'owed' anything but you may 'earn' salary and benefits ..... thus your anger. You and other state employees are free to quit and, if able, make more money and/or better benefits in the private sector. This is one of the few states that is not beholden to the ruinous public sector unions (Read: Thugs).

By: Loner on 4/15/13 at 8:22

Nashville-bound has articulated the right-wing agenda for workers in the state of a nutshell it is this: "Work like a dog for peanuts...or take a one-way hike to another state....Git!"

All those workers benefits that American workers seem to take for granted were all hard-won at the bargaining table....don't ever forget that.

In a capitalist system, management is not charitable, by is not compassionate, by is not humane, by is cut-throat, by nature.

Organized Labor and Collective Bargaining are what created the middle class. Do away with unions, and it's a return to the days of Charles Dickens....or Jeff's just that simple.

By: pswindle on 4/15/13 at 8:23

Thanks to former Governor Bredesen in protecting and investing retirement money in the right way. He knew what he was doing. Please don't let Haslam touch it!

By: Loner on 4/15/13 at 8:39

How about we pass a law that requires politicians to "pony up" some personal cash, to finance their generous pension plan & benefits package? Let's start this "reform" movement at the top, not at the bottom....start the ponying up with State Treasurer, David Lillard...."a numbers guy who has spent the past year drafting potential changes to the Tennessee Consolidated Retirement System."...according to this article.

Yeah....let the personal sacrificing begin with the creator of the idea, Mr. Lillard....let Dave show us the way, by way of personal first, Dave.

By: jwk6179 on 4/15/13 at 8:41

The problem that most Tennessean don't understand is that the biggest majority of State Employees DO NOT MAKE nearly as much as Ron Ramsey, Ralph Bristol, Michael DelGiorno, Dave Ramsey, Phil Valentine and the rest of the Right-Wing blow hards tell you they do. I know state employees that have been with the state for nearly 30 years and just now making $30,000 a year. But to hear the right-wing blow hards tell it, the average starting salaries for governement employees is $75,000 a year. And when those state employees that are making $30,000 a year retire, their pension is only going to be about half of their salary ($15,000 a year). According to the federal government, that's considered proverty levels.

By: Magnum on 4/15/13 at 8:42

I've never understood why one group (the teachers) have been singled out and asked to pay 5% into the current system.

By: Loner on 4/15/13 at 8:47

Pswindle, your Haslamophobia is shared by many...if the fear is legit, then it is no longer a phobia, I is reasonable and prudent to fear what Gov. Haslam has up his sleeve for the working people of Tennessee....In my view, the guy is a union-hating aristocrat who is in over his head....underlings are running the show...he just sets the mean-spirited tone....his staff knows how to please him....the fawning sycophants know the agenda...Haslam's is an auto-pilot Governorship.

By: Loner on 4/15/13 at 9:16

Governments that rule, by way of government fiat, from some strongman are called, "autocracies"....a government that rules, by way of stealing, is called a, "cleptocracy"....when a government rules by religion, we call it a "theocracy".

When a government rules by way of meanness, spite, jealousy and contempt, perhaps, we should call such a malicious and malevolent government a "malocracy".

Right now, the Tea-Bagger-addled government of the state of Tennessee falls into the malocracy classification.....and the mean-spirited Tea-Baggers are a bunch of malocrats....doing their malicious best to screw the citizenry.

By: Loner on 4/15/13 at 9:26

Magnum, public school teachers are being singled out, because they are the South, anything with the word, "union" in it is loathed..just a knee-jerk reaction that dates back to 1861.

Good teachers are a threat to the status quo, therefore they are targeted by those who would be threatened by reform and progress. Substandard scab teachers are being recruited to serve in keep the poor keep the ignorant maintain a privileged class, at the expense of everyone else.

Keeping the electorate ignorant and dumbed-down is key to maintaining the status quo....that's the way the old money likes it....they pay the piper...they call the!

By: govskeptic on 4/15/13 at 10:00


What is your problem with financial responsibility within pension plans?
Does your daily rants against Republicans a race with Loner for site
leadership or a brilliant wisdom contest. Unfunded pension funds are
a nationwide problem and have been for years. The number of private
firms that don't have employee participation is very small and falling.
Many cities and states now have unfunded obligations in the billions
for promised pensions and are now calling on the nation's taxpayers
to bail them out, as if the nation made the promises. Most of these
promises were made because of Union demands, but no one
bothered to set aside for the payout. Responsibility is a bitch.

By: Loner on 4/15/13 at 10:20

That's it,'s a battle for site leadership...a "brilliant wisdom" contest between two unpaid posters who post on troll-infested sites like this one....we do it for the sport accolades...couple of selfless saints, pontificating on the's our noble mission...enjoy!

By: JeffF on 4/15/13 at 10:47

How does someone living in NY know one way or another what is happening to teachers in Tennessee. I hope it isn't based on assumption and the rantings of the alternative paper and it's hilarious running commentary.

Have a coke and smile and remember to keep all politics local, as it where you live? Preach the union-label to folks around you and let the local grown-ups talk.

By: nashville_bound on 4/15/13 at 11:27

Loner.... I am amazed that someone is still holding TN teachers up as worthy of praise. While I am sure there are a few competent teachers they pale in comparison to the failures of the overwhelming majority.

Teacher and school competition is coming and I for one will be happy when teachers are paid according to ability and not a monolithic one size fits all union mantra. The only teachers that fear this outcome are the ones that know they are subpar.

By: Loner on 4/15/13 at 11:56

By: JeffF on 4/15/13 at 11:47

How does someone living in NY know one way or another what is happening to teachers in Tennessee. I hope it isn't based on assumption and the rantings of the alternative paper and it's hilarious running commentary.

Jeff, it's global Marshall McLuhan predicted in the 60' are free to comment on newspaper comment boards in New York state, as a reprisal to my commenting here.

Try it, it's fun...not having a dog in the fight and being able to see the forest, not just the trees, can help both the out-of-state poster and the local outsider's honest opinion is not worthless, it can be invaluable. Staying on top of local news in Nashville and TN keeps my brain firing on all eight...I'm retired....this is therapy.

To answer your question, I use Google News as my primary News source these days...videos are imbedded in these online stories and their comment boards are there for discussion and's a wonderful thing.

I found the Nashville City Paper years ago, by way of a Google News item...I love the free speech aspect and immediacy of the NCP boards...not too many posters and not too few...I love Nashville, TN, my intentions are good.

I sometimes post on the Tennessean too.....howdy, neighbor.

By: Loner on 4/15/13 at 12:06

Nashville_bound, when it comes to educating the youth of today, teachers are only one piece of the matrix...genetics are what they are, but parenting is equally important in getting a child ready and eager to learn...values, ethics and work habits are learned at home, before a child attends school....the desire to learn has to be nurtured in the home, not just in the schools....and communities must be willing to pay for what a good education costs these days....simply blaming our educational failures on unionized teachers is scapegoating and it's not fair nor deserved.

By: Magnum on 4/15/13 at 12:47

Loner, I'm a bit ignorant regarding state-level unions, but doesn't the TSEA represent all (member) state employees?

By: Kosh III on 4/15/13 at 12:52

TSEA is not a union, it is an Empoyee Association and cannot engage in collective bargaining. Government employee unions are illegal in this Right-to-Fire state.

By: Kosh III on 4/15/13 at 12:53

"What is your problem with financial responsibility within pension plans?"

Read the story: the employee pension plan is in good financial condition and was in NO danger of the things you cite.

By: Magnum on 4/15/13 at 1:07

Thanks for the clarification Kosh. So in essence, it sounds like TSEA is a PAC. I guess teachers aren't considered government employees then?

By: Rasputin72 on 4/16/13 at 4:37

The days of wines and roses are gone for the foreseeable future for all but the luckiest aand brightest and most motivated of American children of tomorrow.

By: Ask01 on 4/16/13 at 5:19

Keeping this at the simplest level for some of our slower readers, most government workers, mainly the rank and file, work for fairly mediocre wages. The reward for surviving on such wages and enduring the public is retirement. Consider the lower wages as paying into their retirement.

By: BigPapa on 4/16/13 at 7:05

Pensions are a thing of the past. The state shouldn't even offer it as a benefit any more. They should honor those that are invested but all new hires get a 401k or 403b and that's it.
Private business dont offer this any more, and the only ones that do only do so because they are held hostage by a union.

Personally I'd rather be responsible for my own retirement than hope the government invests the pension fund appropriately.

By: BigPapa on 4/16/13 at 7:06

sorry, "those that are vested" damn auto correct.

By: pswindle on 4/16/13 at 7:34

Everytime the GOP takes control, the first thing that they do is to go after the little man with the smallest paycheck. When Haslam gets through with the average state worker, the worker will have to pay the state to work. By refusing the healthcare plan, the state workers will have to pay more and pay more into their pension when in the long run the workers will lose big time. This is why they are re-working the system. Haslam has taken every safety-net away from the working people of TN. Thanks to Gov. Bredesen, TN pension is in great shape and does not need anything done to it, but Haslam thjnks that the retirees might have enough to live on and that will not do. Take it away, take it away the workers are slaves of the state.