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Subcommittee advances revised Group 3 retirement plan bill after compromise on start date and vesting
Summary
Lawmakers debated House Bill 581, which would create a new Group 3 defined-contribution plan for new state employees. The subcommittee approved amendments that delay the plan's start date and add a two-year employer-vested period, then voted to forward the bill as amended.
Members of the Executive Departments and Administration subcommittee heard testimony and debated House Bill 581, which would establish a new Group 3 retirement plan for state employees hired after the bill's effective date. Proponents, including the bill's sponsor and an actuary who provided comparative analysis, said the change would bring elements of defined-contribution plans used in the private sector to state employment and could provide portability and potentially higher long-term returns for some workers.
Opponents cautioned the change could worsen the state's unfunded actuarial accrued liability (UAAL) unless carefully structured. Lawmakers asked how the proposed design would affect recruitment and retention of teachers, firefighters and other public servants and whether the employer share of unfunded liabilities would be protected.
After discussion the subcommittee accepted several amendments. The key changes: move the new hire effective date to Jan. 1, 2026 (instead of July 1, 2025) to allow implementation time; add a delayed employer-vesting schedule so employer contributions vest only after two years of service; and incorporate a sponsor-proposed amendment clarifying inclusion in medical and health insurance groups. Proponents said the two-year delay for employer vesting matches common private-sector practice.
With those changes, the subcommittee voted 3—2 in favor of "ought to pass" as amended and moved the bill to the full committee.
The measure drew divided views during the hearing: several lawmakers expressed concern about the impact on retention and the state's pension funding plan, while others said a defined-contribution option could help attract younger workers used to 401(k)-style accounts.
The bill will proceed to the full committee for additional consideration.
