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Committees defer police deferred-retirement option after ERS and AG warn of financial, tax risks
Summary
Senators heard that a proposed deferred retirement option for police officers could increase the Employees' Retirement System's unfunded liability and raise IRS and age-discrimination concerns; committees recommended indefinite deferral.
Senators heard testimony Feb. 3 on a proposed deferred retirement option (SB470) that would let eligible police officers postpone retirement while continuing to work and accrue benefits. The measure was deferred indefinitely after testimony from the Employees' Retirement System and the Attorney General highlighted financing and federal-tax risks.
Tom Williams, executive director of the Employees' Retirement System, told the joint committees the program as drafted would cut off employer and employee contributions for the period members are in the deferred-retirement option and thus reduce funds used to amortize the ERS’s unfunded liability. “I think most of you are aware that the ERS has a $14,100,000,000 unfunded liability,” Williams said, and he described actuarial scenarios showing contribution-rate increases would be needed to keep amortization on target.
Attorney General representative Elmira Zhang told the committee the measure could carry “significant and unpredictable impacts on the ERS's tax qualified status” and raise issues under the Internal Revenue Code and the Age Discrimination in Employment Act; the AG’s office urged the committees to allow ERS to seek an IRS private letter ruling to resolve tax questions before further action.
Multiple police chiefs, union leaders and county council members registered support in written testimony and several submitted in-person remarks in favor of providing a deferred-retirement option for recruitment and retention purposes. The ERS and the Department of Budget & Finance expressed concern over the plan’s fiscal design. The committees ultimately accepted the recommendation from budget, ERS and the Attorney General and deferred the bill indefinitely.
The committee record notes the deferral was recommended primarily due to fiscal impacts posited by Budget and Finance, ERS financing scenarios, and unresolved IRS and Age Discrimination in Employment Act questions. No formal amendments were adopted; the measure will return only if sponsors address the funding and federal-tax issues.
