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By Dale Wetzel, Associated Press Writer, Published April 28 2010

Bill would put new North Dakota workers in 401(k) plans

BISMARCK – Newly hired government employees and school teachers in North Dakota should have their own retirement savings plans instead of a pension that’s guaranteed by taxpayers, a state lawmaker says.

Rep. Frank Wald, R-Dickinson, predicted Tuesday that the North Dakota Legislature will be wary of proposals to pump money into the state’s troubled public employee pension funds, which would ease the need for workers to raise their contribution rates.

“I can’t ask my constituents to pay more taxes to bail out a public retirement plan for teachers and state employees, when nobody’s bailing them out,” Wald said. “The people ... are tired of bailouts.”

Rep. Lisa Wolf, D-Minot, said the guaranteed pension for public school teachers is an important inducement in hiring new teachers and keeping experienced ones.

“In the end, your reward for taking a low salary, for staying in North Dakota ... is that pension,” Wolf said.

Declines in North Dakota’s pension funds, which coincided with the stock market’s steep drop about two years ago, prompted lawmakers to explore changes in how they are run. Administrators have offered proposals including increased pension contributions, benefit changes and infusions of tax money.

Wald and Wolf spoke at a meeting of an interim legislative committee that reviews possible changes to the North Dakota Public Employees Retirement System, which manages a pension fund for most state workers, and the Teachers’ Fund for Retirement, a separate fund that covers public school teachers.

The panel will make recommendations in a report to the 2011 Legislature, which begins in January.

Both funds get a share of employee paychecks, which is matched by their employers. Workers are guaranteed a monthly check at retirement, with its size depending on each person’s earnings and how long he or she worked.

The retirement benefit cannot be reduced. It is not indexed to inflation, although lawmakers can provide increases if they choose.

Wald’s bill would keep the pension plans for current teachers and state government workers. For new hires, money that would have been paid to a pension fund would go into a 401(k)-style savings plan. Employees would be responsible for investing the money, and would have no backstop against losses.

The Teachers’ Fund for Retirement has asked for a $75 million transfer from the state treasury into its pension fund. Normally, the fund’s assets come from teacher and school district contributions and investment earnings.

Wald, who is not seeking re-election this year, said the public would rebel at the idea of propping up North Dakota’s public pension funds.

“Most people suffered a loss because of the market,” Wald said. “Why, why, should the taxpayer bail out someone’s pension plan, when they don’t do it for society as a whole?”

In the budget year that ended June 30, the Teachers’ Fund for Retirement lost more than 27 percent of its value, while the pension fund for state government workers declined more than 24 percent. Both had registered single-digit losses during the previous budget year.

In recent months, the funds have posted gains that correspond with a general rise in the stock market. From July through December, the teachers’ fund gained nearly 18 percent, while the public employees’ fund rose almost 17 percent, according to the state Retirement and Investment Office.

In the past five years, the teachers’ fund has gained about 1 percent in value, while the fund for state government workers has increased about 1.6 percent – well behind the 8 percent annual gains that fund administrators normally count on.