Public sector employers in Oklahoma are one step closer to creating a defined contribution retirement plan for workers with the passage of House Bill 2630, also known as the Retirement Freedom Act. The bill was approved this week by a majority in the state’s House of Representatives.

“Most workers used to be offered a defined benefit plan – not anymore, not today,” Rep. Randy McDaniel said in his closing debate for the bill he co-authored. “Thousands and thousands of businesses have switched to DC plans. They did not switch because it is costly or harmful. They care about costs. They also care about recruiting and retaining great employees.”

Also See: Automatic enrollment, escalation features feed 401(k) success

First introduced in February, the bill directly affects only workers first employed on or after Nov. 1, 2015. The legislation has been forwarded to the Oklahoma Senate for review.

According to the bill, employees are required to contribute at a rate of at least 3%. Also, while holding the same 3% contribution rate for employers, the maximum employer match is set at 7%.

McDaniel told his peers Tuesday the new plan is more sustainable and flexible.

“When employees leave early to take a better job, to care for a sick family member or to raise a family, they are worse off with the current pension system,” he said. “No matching. No interest. No benefits for their service.”

Also See: How benefits managers can help protect the 401(k)

According to researchers from the Center of Retirement Research at Boston College, recent changes in public retirement plans – in favor of DC options – are fueled by a need to shift risk to participants. Nine states have adopted either hybrid or cash-balance plans for their public sector workers.

While only 11% of public sector workers are currently covered by non-DB retirement plans, the CRR projects that DC participants will account for 19% of the public sector workforce by 2042. The projection is based on the mandatory nature of current hybrid retirement models, as well as the large number of employees scheduled to remain in DB plans 30 years from now.

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