Governor Bentley Details Pension Reform Proposals

Press Release

By:  Arthur Orr Jamie Ison Del Marsh Mac McCutcheon Robert Bentley Mike Hubbard
Date: March 7, 2012
Location: Montgomery, AL

Governor Robert Bentley on Wednesday detailed pension reform legislation that will ensure the viability of the state's retirement system while also saving taxpayers more than five billion dollars over the next 30 years.

"The economic realities of recent years have made it clear that steps need to be taken now to ensure the long-term solvency of Alabama's retirement system," Governor Bentley said. "The measures we are proposing will protect the retirements of hard-working Alabamians who are depending on the system."

"I want to make it clear, these changes would only affect new hires who begin their employment in the year 2013 or later," Governor Bentley added. "Under these proposals, current employees and retirees will not see any changes in their benefit structure."

At a news conference in Montgomery, Governor Bentley was joined by House Speaker Mike Hubbard, Senate Pro Tem Del Marsh, Retirement Systems of Alabama Chief Executive Officer Dr. David Bronner, and bill sponsors Senator Arthur Orr and Representative Mac McCutcheon.

"I commend Governor Bentley for his foresight in crafting these reasonable changes to Alabama's public pension benefits," Dr. Bronner said. "By proposing these modest changes to the system and applying them only to new hires, Governor Bentley's legislation will help secure the financial viability of the retirement system and, most importantly, uphold the promises made to one of Alabama's most valuable assets: our public employees and teachers."

Proposed changes include:

* A minimum retirement age of 62 for most state employees.
Currently, anyone may retire once vested (10 years of service) at age 60 or with 25 years of service at any age. The reform proposals set a minimum retirement age of 62.
* Law Enforcement -- Minimum retirement age of 56.
* Adjust pension payments from an average of the highest-paid 3 years out of the last 10 years of service to an average of the highest 5 years.
* In exchange for the restructuring of benefits, new hires would see their employee contribution rate changed from 7.5% to 6.0%. This will increase their take-home pay.
* Total estimated savings over 30 years: $5.03 Billion
* Average annual savings over 30 years: $162 Million

The proposed changes will bring the state's retirement system more in line with the private sector. Many other states across the country have adopted similar measures. The changes honor Alabama's commitments to current employees while still providing a solid retirement for future employees as well.

"A pension isn't just a number on a piece of paper. It's a person's livelihood -- what families count on as they plan for the future," House Speaker Mike Hubbard said. "We have an obligation to make sure the state delivers on the promises it has made in terms of retirement benefits. That's why we are working together to put forward a reasonable plan that will shore up the system going forward and protect the retirement savings of so many beneficiaries."

"It has become increasingly clear that ignoring pension reform is no longer an option for the sake of Alabama teachers and state employees," added Senate President Pro Tem Del Marsh. "This is not a partisan issue, nor is it unique to the state of Alabama. Since 2007, nearly every state in the nation has been forced to deal with the financial burdens public pension funds are placing on state budgets. Governor Bentley, Dr. Bronner and members of the House and Senate have shown great leadership in working together on a solution that will make sure the state keeps its promise to our hard-working teachers and state employees."

Senator Arthur Orr is the Senate sponsor of the legislation to be introduced.

"We made a long-term commitment to our hard-working teachers and state employees through their participation in state retirement programs, and it is our responsibility to ensure this promise is kept," Senator Orr said. "By enacting these common-sense reforms, we are ensuring the long-term solvency of our retirement system and that taxpayer resources are spent responsibly. I especially want to thank Dr. Bronner for his commitment to the long-term solvency of the retirement programs and Governor Bentley for his leadership in making sure this problem is solved in a sensible way."

Representatives Mac McCutcheon and Jamie Ison are House sponsors of the legislation.

"Like most states, Alabama is taking necessary steps to change the way retirement benefits are calculated for new hires," Representative Ison said. "While some might try to play politics and demagogue this issue, I expect this plan to be well-received in the House. Everyone understands that we have to get our fiscal house in order, and pension reform is a big step in that direction."

"Public employees deserve to have peace of mind, knowing that they can take the promises we've made them to the bank," Representative McCutcheon said. "I appreciate the Governor and Dr. Bronner working with the House and Senate to come up with a plan that ensures we'll have the resources to fund needed retirement benefits in the future."