Members of the Oklahoma House of Representatives voted 93-1 today to improve the fiscal stability of the firefighter pension system.
“Our goal is to put the firefighters’ pension system on a sustainable path that will provide retirement security for those entering the profession today,” said state Rep. Randy McDaniel, an Oklahoma City Republican with nearly 20 years of experience in the financial services industry. “We have produced a meaningful pension reform bill that is fair to both the firefighters and the taxpayers of Oklahoma.”
House Bill 2320, by McDaniel, modifies interest rate provisions within the Oklahoma Firefighters Deferred Option Plan (DROP) by stipulating that the rate of return will be 7.5 percent instead of higher rates currently allowed by law.
Under current law, the rate of return is guaranteed to be the better of the market performance or 7.5 percent, whichever is higher. That results in a compounding effect that dramatically increases guaranteed benefits even at times when market returns are below 7.5 percent.
The measure also increases the employee contribution rate from 8 percent to 9 percent of gross salary and raises the employer contribution rate from 13 percent to 14 percent of paid gross salaries.
“Under this reform, both employees and employers will slightly increase their contributions made into the system in order to ensure greater financial stability of the plan over the long run,” McDaniel said.
Based on current annual payroll figures for the system, the higher contribution rates will generate approximately $2.5 million per year from employer contributions and $2.5 million annually in additional employee contributions for a total of approximately $5 million.
House Bill 2320 also increases the percentage of insurance premium tax allocated to the firefighters’ retirement system from 34 percent to 36 percent.
Based on previous year collections, that change will provide approximately $3.5 million per year in additional revenue for the system.
House Bill 2320 passed the Oklahoma House of Representatives with bipartisan support. It now proceeds to the Oklahoma Senate.