Legislation currently under consideration in the South Carolina State Senate would offer newly hired state employees a choice between two new risk-managed retirement plan options—a modern defined contribution plan or a modern pension plan. The new defined contribution plan would limit risk to the state and taxpayers and allow more workers to accrue a stable, predictable retirement benefit. The new pension plan that would be offered under the legislation would regulate costs better than the current plan does and would not be as vulnerable to market volatility.
A new Reason Foundation analysis of South Carolina Senate Bill 176 finds that, as originally drafted, the bill could produce some long-term cost increases of roughly 5 to 10 percent, depending on market conditions, while shifting to the new plan design (note: cost increases are relative to the costs of an underpriced SCRS pension plan). If slightly amended, the legislation could also put in place a realistic and resilient approach to paying off the pension plan’s debt. Adding actuarially based legacy pension funding to the bill would transform the bill into an effectively cost-neutral overhaul to the pension system.
This analysis examines Senate Bill 176’s impact on the long-term solvency of the South Carolina Retirement System (SCRS). None of the changes modeled in this analysis impact current member benefits.
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