OKLAHOMA CITY (AP) — Oklahoma state employee retirement accounts could become more flexible but riskier under a proposal that now awaits Gov. Mary Fallin’s signature.
The proposal would allow state employees hired after July 2014 to choose between a defined contribution option and the current defined benefit system. The House gave final legislative approval to the bill Tuesday with a 72-20 vote, sending it to the governor.
A defined contribution plan like a 401(k) is generally considered the riskier of the two options, since the benefits it provides to a retiree often depend on the performance of the retiree’s chosen investments and the economy. Rep. Randy McDaniel, R-Edmond and the bill’s sponsor, said it would bring mobility and freedom to state workers’ retirements.
“The fact is this meets a need,” McDaniel, who also works as a financial planner, told the chamber before Tuesday’s vote. “There are public employees calling me all the time saying they want mobility, they want choices.”
The bill would give new state employees 90 days to choose between the defined contribution and defined benefit option. The choice would be permanent. If employees don’t make a choice within that time, they’d automatically slide into the defined contribution plan.
Defined contribution plans have become more common among U.S. employers since the 1980s, according to the U.S. Bureau of Labor Statistics, and by 2010 more than half of private employees had access to the option. The plans can save employers almost half of their benefit costs per participating employee, the Bureau says.