ANNAPOLIS —For the second straight year, Del. Andrew A. Serafini has offered a package of bills that he said could improve the state’s pension system.
Two of his bills would change the system from defined contributions to defined benefits, while another would require counties to pay a portion of pension costs for employees of school boards, community colleges and libraries — if their median salaries exceed statewide medians.
The final bill would eliminate the State Retirement Agency’s Investment Division, including the chief investment officer. The state would hire an independent investment firm instead.
Serafini, R-Washington, said he was “not trying to be a bomb thrower” with the ideas, some of which Sen. David R. Brinkley, R-Carroll/Frederick, is concurrently pursuing in the Senate.
Facing an estimate $19 billion unfunded pension liability last year, the state took steps to close the gap. One main change was having new employees contribute 7 percent of their salaries, up from 5 percent.
Gov. Martin O’Malley this year proposed having counties pay half of teacher pensions. The state has been paying 100 percent.
A Senate committee recently altered the proposal so the shift to the counties would be phased in over four years.
The bills Serafini presented Tuesday to the House Appropriations Committee would have varying effects.
If all current and new members of the Teachers Pension System and Employees Pension System were directed to a cash-balance plan after July 1, state pension liabilities would drop by $6.5 billion, effective June 30, 2013, the Department of Legislative Services determined.
If only new hires — not current employees — were directed to the cash-balance plan, state pension contributions would drop by about $48 million in fiscal 2016 and about $70 million the next year, according to the legislative services.
The bill requiring counties to pay a share of pension costs for salaries above the state median would save an estimated $96 million.
R. Dean Kenderdine, the executive director of the Maryland State Retirement and Pension System, testified against all of Serafini’s bills, just as he did last year.
Kenderdine said the new structures would have “consequences” on asset assumptions, particularly as the employee pool shrinks. Hiring an investment firm would cost the state a lot of money in fees, he said.
Sue Esty, representing the American Federation of State, County and Municipal Employees of Maryland, also opposed Serafini’s proposals, saying they’d lower benefits for employees.
Sherry L. Levengood, a retired teacher from Caroline County, told the committee that teachers work longer than other public employees to get full pension benefits, but have one of the lowest pensions.
Serafini encouraged the committee to at least consider a “summer study” of his bills if they weren’t approved.