OKLAHOMA CITY (AP) — Hundreds of firefighters from across the state rallied Monday outside the state Capitol in support of a pair of bills to overhaul their pension system, even as they acknowledged the proposals would require individuals to increase their contributions.
For several years, Republican lawmakers have been working on ways to reduce the unfunded liability of the state’s seven major pension systems, and now appear to have reached a tentative agreement on major changes to the Oklahoma Firefighters Pension and Retirement System, which has more than 23,400 members. Similar bills have passed both the House and Senate.
Among the key changes for newly hired firefighters is that to become eligible for retirement benefits, they must be at least 50 years old and have worked for 22 years, instead of the current 20. New firefighters also would not become vested until they’ve worked for 11 years, instead of the current 10 years.
The proposal also would require current firefighters to increase their contribution to the system from 8 percent to 9 percent, while individual cities would have to increase their shares from 13 percent to 14 percent. The state’s current contribution of 34 percent would also be increased from between 2 percent and 4 percent, said Rep. Randy McDaniel, the House sponsor of the bills and the chairman of a special House Pension Oversight Committee.
Capt. Stan May, a 22-year veteran firefighter with the Tulsa Fire Department, said McDaniel’s proposal is the product of three years of negotiations between legislative leaders and groups representing the cities and firefighters, both of which have agreed to support the bill.
“It’s a shared sacrifice We all have to give up a little bit more out of our paychecks. The cities have to give up a little bit more. But it makes the system solvent,” May said. “It puts us on the right track, and we feel like we’ve got buy-in from the guys, young and old alike — those that have just started and the older ones.”
The OFPRS was 63.7 percent funded in 2011, with a total unfunded liability of $1 billion, which is the amount owed to pensioners beyond what the system can afford to pay. But that funding dropped last year to 61 percent, with an increase in the unfunded liability to $1.1 billion, according to an actuarial report of the system.
“The current situation is untenable,” said McDaniel, R-Oklahoma City, a financial adviser and broker.
Another key change in the bill would be to the pension system’s deferred retirement option, or DROP, that allows qualified members who would otherwise be eligible for retirement benefits to continue working and accrue money in a separate account. Currently, firefighters participating in the DROP plan are eligible to receive either a 7.5 percent return or the system’s annual investment returns minus 2 percent, whichever is greater.
“That’s simply unsustainable,” McDaniel.
His bill would allow the DROP plan to stay in place only for the first five years after a firefighter is retirement-eligible, similar to the plans for the other public safety pension systems. After that, pensioners could only receive the system’s annual investment return minus 1 percent, but would not be guaranteed a minimum rate of return of 7.5 percent.