The financial leaders of South Carolina have directed the state employees to increase their contribution towards retirement benefits from July 1, 2016. This step was taken as a part of state’s efforts to reduce the unfunded liabilities related to the pension system of the state. The decision makers understand that the employees would not be happy with the move but they think that this step was essential.
The Amount of Increased Contributions towards Retirement Benefits
All the state employees will now be required to contribute 0.5 percent more of their salaries towards retirement benefits from July 1, 2016. The hike was made formal by the State Fiscal Accountability Authority this Wednesday. Apart from the state employee, the cities, counties and employees of other public institutions are also required to contribute more.
One of the aims of the S.C. leaders behind this increase was to ensure that the amount of unfunded liabilities regarding the state’s pension system was reduced. It currently stands at $16.75 billion. The experts also know that increasing the contribution towards retirement benefits is not a long-term solution. Nikki Haley who serves as the S.C. Gov. and chairs the five-member board called the situation was urgent and she also said that solving this problem would not be easy.
Haley also admitted that most people would be upset with the decision to increase the contribution and it’s going to make it hard for them. It is important to add here that the high amount of pension costs would impact over 200,000 S.C. employees who are currently serving local governments, state agencies, and public schools. The police officers, legislators, and judges will not be impacted by this change as they have separate and comparatively smaller retirement programs.
Some people representing the state employees and the teachers have raised their voice against the increase in contributions. Carlton Washington who is currently serving as the Executive Director of the S.C. State Employees Association recently admitted that the state workers are already paying too much towards benefits and he also added that the state agencies suffer as a result.
Washington also pointed out that the agencies are facing enough trouble in recruiting and retaining good employees as the benefits package has eroded.
The Current System
Currently, the state employees pay 8.2 percent of their salaries towards the retirement benefits and soon they will be paying 8.7 percent of their salaries. The employers contribute about 11.1 percent.