NASHVILLE, Tenn. (AP) -- Tennessee's treasurer said Monday that he wants to overhaul the state's public retirement system to cut costs and ensure it can pay out benefits for years to come.
David Lillard said he will propose legislation laying out the overhaul, even though Tennessee's public pension system is faring better than those in most other states. Changes to the Tennessee Consolidated Retirement System will only apply to state employees, higher education officials and teachers hired after July 1, 2014, Lillard said at a news conference. The retirement benefits of those currently in the system won't be affected.
The state is doing better than its peers with similar plans, but earnings of the Tennessee plan have fallen short of expectations over the past several years, he said. The changes are needed because it's uncertain how much money the retirement system's investments will yield in the future, Lillard said.
He said that in 2003, taxpayers spent about $264 million a year to support the system. As of last year, that number had grown to $731 million, he said.
"Based on projections we have seen, the cost could go up by one-third or more over the next 10 years if changes aren't made, which would push the taxpayers' total annual expense above $1 billion," said Lillard, adding that at least 45 states have enacted some type of pension reform in the past few years.
There are currently about 217,000 employees in Tennessee's system, and roughly 122,000 retirees.
The changes being proposed would limit the state's future liability for pension costs by creating a type of hybrid between a defined benefit plan and a defined contribution plan.
The reforms are also intended to reduce pension costs by adjusting the formula used to calculate retirement benefits, raising eligibility requirements and collecting payroll deductions.
Under the current plan, only teachers are required to contribute 5 percent of their salaries. The new proposal would require all state employees to contribute that much.
Lillard said he realizes there may be some concern among new hires, but he said they should understand what the state is offering "versus the private sector and versus other competing entities is a very good pension benefit."
"We want to be able to say to a young state employee who is hired on July 1, 2014, that when they retire ... they can truly expect to see the benefit that we promised them," he said.
Chris Dauphin, spokesman for the Tennessee State Employees Association, said the group hasn't taken a position on the proposal but does have some concerns. He did not elaborate on those concerns.
However, Lillard said some have expressed concerns about a provision in the measure that would allow the state to change the pension plan in the future. Lillard said he doesn't plan to retract it.
"Management of a pension plan requires some flexibility going forward for the interest of the people who are in it," he said.