Gov. Henry McMaster has signed into law a bill to reform the state retirement system, aimed at reducing the pension plan’s $22 billion deficit.
The new law, which will bring in $827 million annually beginning in 2023, will increase most employee contributions from 8.66 percent to a capped nine percent in July.
Employer contributions will rise from 11.56 percent to 13.56 percent, and one additional percentage point annually until 2023.
The law will also reduce the assumed rate of return from 7.5 percent to 7.25 percent and reduce the debt repayment schedule from 30 years to 20 years.
According to a statement by McMaster, the deficit resulted from a combination of factors including workers receiving retirement eligibility after 28 years; a program, now being phased out, that let some state workers collect unemployment while they worked; cost of living adjustments; and lower than expected returns on investments.
“Unfortunately, the only means available today to immediately begin reducing the state’s unfunded liability is to increase employee and employer contributions for the South Carolina Retirement System (SCRS) and Police Officers Retirement System (PORS),” McMaster wrote.
“Disappointingly, H. 3726 does not address the single most important measure which would ensure the long term financial stability and viability of the State’s retirement systems: a date certain transition from the state’s defined benefit pension plans to a defined contribution retirement plan for new state employees.”
McMaster proposed additional changes including—
-A defined contribution plan like an individual 401(k) retirement plan, restricted to new employees
-“Enhanced” contributions by employers based on merit or years of service
-A 2021 review by lawmakers of the governance changes to the Retirement System Investment Commission and Public Employee Benefit Authority
Governance changes most notably include reducing the state treasurer’s influence and expanding influence by House and Senate leaders.