COLUMBIA--Gov. Mark Sanford wants to scuttle the state's traditional pension plan for a new program as a way of curing problems in the South Carolina Retirement System.

Sanford is applying what he learned from years as one of the U.S. House's leading advocates for privatizing Social Security and studying pension systems in 50 countries.

A theme emerged as he studied those systems. Traditional retirement, or defined-benefit, plans are a "great system for the first generation," Sanford said.

"But the history of every defined benefit plan, not just in this country but frankly around the world, has been that they've run into problems down the line -- not because there's a fault with the system, but because of the nature of politics," he said. "People want to add bells and whistles."

South Carolina's plan has that and more. It requires cost-of-living adjustments; allows retirees to return to jobs and draw pay and retirement checks; and lets people retire with full benefits after 28 years.

On top of that, a program intended to retain the state's best teachers has grown out of control, becoming a benefit for all workers.

In his State of the State speech last week, Sanford said legislators recklessly added benefits without enough regard for the financial impact.

Now the system is "a ticking time bomb for state retirees and if we stay on the present course, the cost-of-living adjustments that they've been counting on won't be there."

Part of Sanford's prescription "lies in moving new employees from a defined benefit plan to a defined contribution plan," he said.

Defined contribution plans, including the 401(k), don't offer retirees guaranteed payouts. Employers and workers put money into investments and retirees get what's there at retirement or when they move to other jobs.

The programs have not been used much in government. Traditional plans cover about 90 percent of the nation's public employees, according to the National Association of State Retirement Administrators.

So far, Sanford's proposal has had a lukewarm reception among legislators.

"I'd be real hesitant," said House Ways and Means Committee Chairman Bobby Harrell, R-Charleston, one of the retirement system's five trustees.

ABOUT THE PLAN

South Carolina's primary retirement plan faces challenges this year.


WHOM IT COVERS: -- 185,538 active state and local government and educational workers -- 142,245 former state workers -- 84,420 retirees and their beneficiaries Three other plans cover police, judges and legislators, but they are not facing the same problems.


FINANCES AS OF JUNE 30: -- $25 billion in assets -- $4 billion in liabilities


PAYMENT GAP: The system now has a 28-year gap between money it has on hand and what would ultimately have to be paid to retirees. It started in 2000 with a two-year gap. Changes that increased that:
-- 2000: Teacher Employee Retirement Incentive program and reducing years to full retirement by two to 28. Long-term cost: $1.8 billion.
-- 2001: Cost-of-living adjustment of 3.4 percent. Long-term cost: $353 million.
-- 2002: Cost-of-living adjustment 1.3 percent. Long-term cost: $149 million.
-- 2003: Cost-of-living adjustment 2.4 percent. Long-term cost: $278 million.
-- 2004: Adjusted forecast of plan's needs. Long-term cost: $399 million.
-- 2004: Cost-of-living adjustment 1.6 percent. Long-term cost: $212 million.
-- 2005: A $420 million estimation error is expected to widen the gap to 28 years.

SOURCE: South Carolina Retirement Systems