AUGUSTA – A state lawmaker wants Maine to look at changing its retirement system with the goal of avoiding a new unfunded liability.
Rep. James Hamper, R-Oxford, said Thursday that he would like lawmakers to consider switching to a contribution-based system or having the state join Social Security.
Changes made now won’t help the state cope with its current unfunded actuarial liability, which is debt that began piling up in the 1970s. But Hamper said the state should look toward the future in deciding on retirement benefits to offer new hires.
Hamper’s proposal to switch retirement funding was first reported this week in The New York Times. “My bill is to get the conversation going,” he said Thursday. “Let’s start talking about this.”
Hamper’s bill follows action two years ago to create a task force to study the retirement system. Sen. Peter Mills, R-Cornville, sponsored the legislation and said his interest continues to be in making the system more responsive to the needs of modern-day workers, who tend to switch jobs frequently.
Maine is one of two states in New England that don’t participate in Social Security, which means workers who switch from the private sector to state employment — or vice versa — get reduced benefits when they retire.
Also, Mills said, the current system doesn’t reward lower-paid state workers as much as Social Security does.
A task force report released in March showed that changing from the current system to anything else would cost the state more money.
The state now pays 5.5 percent of payroll into the retirement system. Social Security would cost the state 6.2 percent, but would continue to benefit workers whether they are employed by the state or not.
Under the current system, the state saves money because fewer than half of the employees — who contribute 7.65 percent of their pay to the system — eventually retire from the state and receive a monthly benefit.
Maine has a defined benefit plan, which means employees who reach retirement age are guaranteed a fixed monthly amount when they retire.
If the state switched to Social Security and a 401(k), the state would have a 9.2 percent annual cost, compared with 5.5 percent of the current plan, according to the retirement system.
MaineToday Media State House Reporter Susan Cover can be contacted at 620-7015 or at:
scover@centralmaine.com
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