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Article published Jan 20, 2005
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State retirement system needs attention to protect employees and taxpayers
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An independent study has shown that the state retirement
system needs more than small changes.In his budget, Gov. Mark Sanford proposed
phasing out an expensive new benefits program and increasing the retirement
eligibility for state employees from 28 years of service to 30.Those are good
ideas, but the study, conducted by an independent firm hired by the state, found
that they won't be enough to correct the $4.2 billion unfunded liability in the
state retirement system.State lawmakers should start with Sanford's reforms and
move on from there.Sanford would end the Teacher and Employee Retention
Incentive (TERI) program for new state hires. This program allows state
employees to retire but defer their retirement benefits while they continue to
work for five more years.It was originally intended to keep teachers on the job,
but it was expanded to all state employees. It's a sweet deal for employees, but
it is costing the retirement system money.The program should be phased out. At
the very least, it should be withheld from new state employees, but lawmakers
should look into ending it for all employees who have not enrolled in
it.Likewise, retirement eligibility for state employees, which was lowered from
30 years of employment to 28 five years ago, should be returned back to the old
standard. Earlier retirement adds to the cost of benefits.While the TERI program
and 28-year retirement have exacerbated the retirement system's problems, an
even greater cause may be the limited nature of the system's investments.The
retirement system had been prohibited from investing in stocks and entered the
stock market only in 1999, just before the recession. The system is now limited
to investing 40 percent of its funds in the market.Sen. Hugh Leatherman,
R-Florence, is proposing a more aggressive investment strategy to increase the
return the system can earn on its investments.Lawmakers should give serious
consideration to all these proposals. The TERI system and 28-year retirement
should be the first to go, but further restructuring also will be needed.The
General Assembly needs to ensure that retirement benefits will be available when
state employees need them and that the state's taxpayers won't be called upon to
make up any unfunded liability in the system.