Lawmakers Close Loophole Draining State Retirement System

Legislators voted Thursday to close a loophole that allows some state workers to obtain greater retirement benefits than they ever earned in monthly pay as a state employee.

Senate Bill 1641, by state Rep. Dan Sullivan, would
ensure that elected officials will not receive
retirement benefits "greater than their single highest annual compensation received as a member of the Oklahoma Public Employees Retirement System."

"Currently, it is possible for some individuals to receive a bigger paycheck from the retirement system than they ever earned working for the state," said Sullivan, R-Tulsa. "That doesn't make sense and it is undermining the financial soundness of our state retirement systems."

Under existing law elected officials can pay a 10 percent contribution rate and elect to receive a 4 percent multiplier in their pension calculation formula. In contrast, regular state employees pay a 3.5 percent contribution rate and receive a 2 percent multiplier.

However, if an individual who worked for state or county government retires as an elected official with at least six years of elected service, that person can have his or her benefit calculated using the 4 percent multiplier for all years of service, including years when the individual was not in elective office and paid only the 3.5 percent contribution rate.

Officials have indicated that more than 500 people receive enhanced benefits because of the loophole, which is costing the state hundreds of thousands of dollars each year.

The most famous beneficiary of the loophole may be former Auditor and Inspector Clifton Scott, who now draws a pension of nearly $147,000 for a job that paid $83,510.

Under Senate Bill 1641, benefits would be calculated using the higher multiplier for only the years of service in elective office. "This is a common-sense reform that will bring equity to the system so that all state employment retirees are treated fairly and with more equality," Sullivan said. "It shores up our retirement system for all workers."

Senate Bill 1641 passed the House Economic Development & Financial Services Committee on Thursday and now proceeds to the floor of the Oklahoma House of Representatives.