Nixon signs pension overhaul for state workers

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New Missouri employees will need to work more years for the state and contribute part of their salaries to get the pension benefits of their more experienced colleagues.

Gov. Jay Nixon signed a pension overhaul into law Monday that supporters hope will help the state budget by saving about $660 million over 10 years. It also could offset the cost of offering Ford Motor Co. and other automotive manufacturers $150 million in tax breaks over the next decade.

Lawmakers approved both the pension and automotive tax breaks in a three-week special legislative session that ended Wednesday. Nixon said the state pension changes are “commonsense reforms” that follow what private employers have done.

“These reforms will help ensure that Missouri’s state employee pension system remains solvent for years to come, helping us avoid the pension crises other states are experiencing,” he said.

Under the law, employees hired starting in 2011 must contribute 4 percent of their pay into the retirement system. Currently, state workers do not pay anything into their pensions, and the retirement system is funded through taxpayers and investment income.

To qualify for their pensions, employees will be required to spend a decade working for the state instead of the current five years. And the minimum retirement age will be increased from 62 years old to 67 years old for most employees.

State employees currently also can retire when their age plus the number of years working for state government equals 80, so long as they are at least 48 years old. That option will be increased to a sum of 90, with workers needing to be at least 55 years old.

State lawmakers and other elected state officials will get more favorable treatment. The bill increases their own standard retirement eligibility from age 55 to 62, with six years of service necessary for lawmakers and four years for executive branch officials.

The Missouri Corrections Officers Association said requiring new employees to contribute part of their salaries amounts to a pay cut, and additional years of work may not be possible for many working in prisons under stressful conditions.

Gary Gross, the group’s executive director, said corrections officers face assaults and other hazards and that recruiting new employees could be difficult after the economy improves. He said many corrections officers also are unhappy that pension changes are being used to help fund tax incentives for private companies.

“A tremendous number of people are concerned about taking money from future state employees and giving it to Ford,” Gross said. “They feel like the budget gets balanced on their backs.”

The automaker incentives will let manufacturers keep employee withholding taxes they normally would pay Missouri if they improve their factories for new or expanded product lines. It’s aimed at keeping Ford’s plant near Kansas City, which employs about 3,700 people, but auto suppliers across the state would be eligible too.

Several states in recent years have considered changes to their pension systems. For example, Colorado eliminated a cost-of-living increase for retirees this year and limited future adjustments in benefits.

Keith Brainard, the research director for the National Association of State Retirement Administrators, said most of the nation’s public employees are required to contribute part of their salaries toward their retirement.

Brainard said pension changes have been prompted by higher retirement costs, the retirement system’s falling investment income and state budget troubles.