Las Vegas Sun

March 28, 2024

Nevada Territory

Sandoval proposes smaller retirement plan for new hires

Gov. Brian Sandoval will propose a drastically smaller retirement plan for new state workers in an effort to control long-term costs to the state.

Sandoval Chief of Staff Heidi Gansert said the new retirement system would guarantee about half of what is currently offered to state workers, and also include a 401k-type defined contribution portion.

"The state can't guarantee the high rate of retirement," Gansert told a press briefing this afternoon.

She said the new rules would apply to employees hired after January or July 1, 2012.

Gansert said there would be a new fund established.

"The current plan needs to fund itself - new employees cannot fund current employees'" retirement, Gansert said.

That could create a problem for the current retirement fund, called the Nevada Public Employee Retirement System.

It has an "unfunded liability" of around $10 billion - the long term costs to pay off all that the state has promised current and retired public employees, minus the money it has and what it expects to generate from investing and new employee contributions.

That would mean current employees and the state's general fund, which already faces a huge deficit that lawmakers are trying to balance, would have to make up the difference to fund the existing promises.

"That would basically add $2 billion more to our current budget crisis," said state Controller Kim Wallin, a Democrat.

A study commissioned by Nevada PERS looked at what would happen if the state closed its current retirement system.

Over the next two years, state and local government employers and employees would have to contribute an additional $1.2 billion, according to the study by The Segal Company. While it looked at the scenario if the state formed a "defined contribution," the effect would be similar if a new fund was created that couldn't be pooled with current and retired employees.

Gansert said the governor's proposal, submitted Friday to the Legislature, is targeted at state workers. Changing the system for new local employees, such as city or county firefighters and school district teachers "hasn't been considered yet."

A draft of the bill is not expected until this week at the earliest.

Current employees get 2.5 percent per year of service towards their retirement, capped at 75 percent of their three highest years' salary after empoylees 30 years.

Gansert said the new retirement would be 1 1/4 percent, capped at 37.5 percent of the highest year after 30 years. She said the new system might use a formula other than the three highest years

State workers are not part of the national Social Security plan.

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