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Cities and Counties Seek Ability to Withdraw from State DC Plan; PERS Flags Fee and Buying‑Power Issues
Summary
House Bill 1602 would let political subdivisions withdraw from the new state defined contribution (DC) plan and establish their own DC plans; proponents said the change offers local flexibility, while PERS warned the split could raise fees for remaining participants and urged more time before any emergency effective date.
Representative Jim Casper introduced House Bill 1602, which clarifies that political subdivisions that previously participated in the state retirement system’s defined benefit plan may form and participate in their own defined contribution (DC) plans instead of remaining in the PERS DC plan established after the DB closure.
Casper said the 2024 legislation that replaced the closed defined‑benefit plan with a DC plan left an ambiguity about whether political subdivisions could opt out and create their own DC plans. He read a legislative counsel memo noting the drafting did not expressly authorize political subdivisions to withdraw and described HB1602 as a technical clarification to allow local governments that prefer their own DC arrangements to do so.
Supporters including Matt Gardner (North Dakota League of Cities) and David Wakefield (finance director, City of Minot) told the committee the change is requested by numerous local governments that want the flexibility to maintain or return to locally managed DC plans that some already use. Wakefield said the city of Minot previously moved between plan types and wants the ability to place new hires into a locally administered DC program to reduce administrative complexity.
PERS testified in a neutral capacity through Derek Holbein. PERS staff explained two fee‑related concerns if political subdivisions withdraw: (1) record‑keeper fees could rise for remaining participants because vendors priced their contracts based on expected enrollments, and (2) investment buying power could weaken if assets are split, possibly reducing access to lower‑fee funds normally available to larger trusts. Holbein said PERS does not currently plan to charge withdrawing employers fees and that PERS can implement a withdrawal process, but an emergency clause (immediate effective date) could be difficult to accommodate quickly because administrative documents and legal processes still need drafting.
Ending: Committee heard strong local support for giving political subdivisions a choice; PERS staff asked the committee to weigh possible fee impacts on remaining plan members and to allow time for administrative work before any accelerated effective date.
