Committee hears bill to let employees opt out of state defined-contribution retirement plan; title struck for revisions

Senate Bill 1029, which the sponsor described as an option allowing state employees to opt out of participation in the state-defined contribution (Pathfinder) plan, drew extended committee debate on the scope and fiscal consequences of permitting opt-outs for current employees.

Senator Saccheri, the bill's sponsor, said the measure is intended to give employees flexibility to invest their own contributions outside of the state plan. "I've been in some sort of retirement state system for 10 years and I have nothing to show for it," Saccheri said in closing remarks, explaining why she introduced the bill. "I believe I can do it better."

Committee members pressed for detail on whether the bill would apply only to new hires or to current employees and what protections or requirements would apply if an employee withdrew funds. Joe Fox, executive director of the Oklahoma Public Employees Retirement System, told the committee that under current law active employees are generally required to remain in the plan; a terminated employee may withdraw but could face IRS early-withdrawal penalties and taxes if funds are not rolled into another qualified retirement account. "If you terminate employment, yes, you can pull those out at any time," Fox said, "but if you do so before the retirement age ... you do pay an early penalty withdrawal plus you pay taxes on that."

Multiple senators asked whether the bill would leave employees free to take contributions as cash or require rollover into other retirement vehicles. The sponsor and staff indicated the bill's language needed clarification; several members suggested the simplest approach would be to limit opt-out options to new hires or to add mandatory rollover requirements.

Senators also raised concerns about the broader effect on the state's pension systems: whether loss of participation or employer matching could undermine existing retirement funding and whether the legislation could increase long-term state liabilities. Senator Kurt said the bill could "undermine" the system by reducing participation and matching, which helps keep employees in state service.

The sponsor agreed to work with OPERS staff and committee members to tighten drafting and to consider whether the opt-out should be irreversible, limited to new hires, or paired with mandatory rollover/education requirements. Committee action included agreement to strike the bill's title for further drafting and coordination; the sponsor and staff said they will return with clarified language before floor consideration.