Changes to state pension plan, 401(k) rules advance in NC Legislature

Part-time state workers could soon be allowed to participate in the state’s 401(k) retirement savings plan, under a bill that passed the state Legislature on Tuesday.

The House Pensions and Retirement Committee approved three bills that make a wide range of changes to state pension law. Many were minor or technical changes, but some could have a real effect on state employees.

In addition to allowing part-time workers in the state’s 401(k) program — which is separate from the pension plan — the changes would also simplify rules in the pension system for state employees to buy credits for their retirement years. government service, if they want to retire early.

Another proposed change would give state employees more protections in cases where the government mistakenly undercounts their years of service, changing the law to say the state “shall” correct the error, rather than “may” correct it that.

It all comes at a time when the state government is scrambling to fill job vacancies as well as investigating a potential billion-dollar hole in state employee pension and health plans that critics say the legislature set the stage for. last year’s state. the budget.

Representatives of the North Carolina State Employees Association, a lobbying group for state employees, were in the room watching as House Bills 988, 989 and 1020 passed committee Tuesday.

Concerns about pension stability

For years, North Carolina has had one of the most stable state pension systems in the country. But state Treasurer Dale Folwell, a Republican who is leaving office next year after his loss in this year’s GOP primary for governor, has raised concerns about the future of the retirement system.

He told WRAL last year that pension and health plans could face a hole of more than $1 billion because of a new law, which passed in last year’s state budget and took effect in January, which allows current hospital and other health care workers at UNC-Chapel Hill and East Carolina University to opt out of the State Health Plan and the state’s pension plan — and prevents any future employees of those health systems run by state to join state health and pension plans.

Leadership at both universities lobbied for the changes, saying they want to create their own health and retirement benefits to better compete with private-sector health care companies.

Folwell told WRAL last year that beyond potentially violating federal tax law, these new changes could also harm the financial health of state health and pension plans by laying off thousands of employees — many of them healthy doctors and nurses, many of them paid – overseas. plans The rest of the state’s workforce would be left to pick up the tab, he said.

“It’s immoral,” Folwell said last year. His charge was strongly denied by UNC and ECU spokespeople, who said the changes should benefit taxpayers in the long run.

These new changes became law last year with little public debate. A similar version of the proposal passed the state Senate in April, but was promptly killed in the state House. In September, it reappeared in the state budget, which was written in secret and passed into law with no opportunity for amendments or public comment.

One of the bills advancing Tuesday, HB 1020, made some changes to the rules for calculating pension eligibility for people who move back and forth between those health entities and the rest of the state’s workforce. This part of the bill was not discussed by any lawmakers on the committee or lobbyists and members of the public on the committee, and is thought to be a minor change.

The discussion focused more on another part of the bill that would in the future prohibit lobbying groups and other associations from allowing their members to automatically deduct their dues from their retirement checks. Groups that already do this will be grandfathered, but future groups will not be able to do so.

Rep. Jeffrey Elmore, R-Wilkes, questioned whether that would create an unfair playing field for future political groups working on behalf of state employees. But these concerns did not affect the other members of the committee and the bill was approved.