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Committee receives educational briefing on Plan 3 hybrid retirement design; no action taken
Summary
Staff provided an overview of Plan 3’s hybrid design and history, contrasting it with Plan 2 and outlining changes over time; the briefing was educational and the committee did not take action but several members asked for demographic and membership data.
Darren Painter, committee staff, briefed the Select Committee on Pension Policy on the history, design and major differences between Plan 3 and Plan 2. The presentation was framed as an educational background briefing and no committee action was required.
Painter described Plan 3 as a defined-benefit/defined-contribution (DBDC) hybrid created in the 1990s to give members more control and portability while preserving a guaranteed employer pension equal to roughly half the Plan 2 benefit. Key Plan 3 features noted: a guaranteed employer-funded pension with COLA (about half Plan 2’s formula), an employee-funded savings account with selectable contribution rates and investment options, terminated-vested salary protection that provides pre-retirement COLA for some separated members, and vesting rules that vary by age (10 years for those under age 45; 5 years for members age 45+ with required post-44 service).
Painter traced major policy shifts over time — including vesting changes, the 2014 IRS-driven change to contribution-rate choice timing, and the 2019 switch of the default plan back to Plan 2 — and noted that Plan 3 was designed for a more mobile workforce while Plan 2 better serves career employees seeking predictable guaranteed benefits. Several members asked for comparative membership data (average retirement age, service, plan selection rates) and Painter suggested the committee could request a focused data comparison if it wanted to study the plan’s outcomes in more depth.
The committee accepted the briefing as background for potential future study and no legislative proposal was advanced today.
