BISMARCK -- The 2008 stock market meltdown didn't do North Dakota teachers or public employees any favors. Retirement funds managed through the State Investment Board lost almost a quarter of their value, raising questions about the long-term health of these programs.
The same kind of losses hit pension funds across the nation, as well as 401(k) retirement accounts of millions of individuals, self-employed or working for corporations and private businesses.
In the case of North Dakota's public workers, state and local governments have assumed the responsibility of the employer in developing and helping to fund the state Teachers Fund For Retirement and North Dakota Public Employees Retirement System.
There are more than 20,000 nonretired members of NDPERS.
The Legislature has begun to sift through its options in dealing with the TFFR and NDPERS, and should, at a minimum, develop a strategy to stabilize those funds. It means a combination of reducing benefits and increasing contributions, whether from the employees or the employer (state and local government). Those already retired would not be affected by these changes.
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Beyond that, lawmakers and the TFFR and NDPERS membership need to address a number of core concerns related to funding retirement benefits. It may not be possible to address this all in one session of the Legislature. Points to consider:
-- The national trend has been away from pension funds with guaranteed benefits, such as those in North Dakota. Many corporations instead provide their employees with 401(k) retirement programs, often matching employee contributions. There are varying degrees of involvement in the management of the retirement funds by employees.
Rep. Frank Wald, R-Dickinson, has prepared a bill that would have all new state employees be offered some kind of 401(k) plan. That's certainly the trend and should be given serious consideration.
It would be much more difficult to migrate existing public employees to 401(k) plans. It might be done in stages depending upon length of service, but first the Legislature would have to agree to some sort of overall strategy for phasing out the existing program. That kind of agreement would be hard to come by.
-- Reducing benefits from the existing retirement programs -- shifting from the rule of 85 (age plus years of service) to 90 as a qualifier for retirement -- would not in itself stabilize the fund. It is, however, the national trend, and it would help.
-- Increasing the combined contribution of employees and employer by 4 percent would not stabilize the fund, but it would put off insolvency for a time, according figures from the NDPERS Web site. A combined increase of 8 percent would stabilize the fund and, over 30 years, return it to good health.
Presently, the combined contribution is 8.12 percent, with 4 percent considered the employee portion, and 4.12 percent considered the employer portion. The state, however, has picked up the employee 4 percent in lieu of a salary increase -- that's not necessarily the case with local government.
So, increasing the contribution by 4 percent would make the combined contribution 12.12 percent; and increasing it by 8 percent, would make the combined contribution 16.12 percent.
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How those contributions might be split, between employer and employee, would be open to debate.
Individuals in the private sector still are smarting from the Wall Street meltdown. Unlike the largest financial institutions in the country, employee 401(k)s are not getting bailed out.
State employees, local government employees and school district employees should be treated the same as workers in the private sector, no better and no worse. The Legislature needs to craft a retirement strategy that makes that happen. Messing with someone's retirement isn't something to be taken lightly. It's serious business.
