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New Hire Plan for Employees' Retirement System of Georgia

The Employees’ Retirement System of Georgia has recently introduced legislation for three possible options for a new retirement plan for new hires, referred to as the “New Hire Plan”.  The New Hire Plan, which would be for new hires on or after July 1, 2008, would be further studied and evaluated by the Legislature and the retirement system over the next year and be considered for vote during the 2008 Legislative Session.

Please be assured that all pension promises to retirees and current employees would be kept in place.  This means that the pension benefits for retirees, Old Plan members and New Plan members would not be changed.  No pension promises would be broken.  With pension benefits guaranteed by the State of Georgia and defined in the pension code, current retirees and members need not be concerned about changes to their pension benefits.  Again, the New Hire Plan would be for new members to Employees’ Retirement System on or after July 1, 2008.

The New Hire Plan is only proposed for ERS and not for members of the State of Georgia Teachers’ Retirement System, Public School Employees Retirement System, Judicial Retirement System, Legislative Retirement System, or Military Pension Fund.

Why the need for change?  The State of Georgia Merit System (GMS) undertook an “enterprise” approach in addressing concerns about employee benefits for state employees.  In relation to private enterprise, GMS found that the state was high on retirement benefits and low on salaries.

Specifically, a recent survey of state employees was conducted by Mercer Human Resource Consulting on behalf of GMS.  Preliminary findings of the survey suggested the following:

1. State workers are dissatisfied with pay
2. Pay-for-performance was of greater importance to younger employees (under the age of 30) who are earning less than $35,000 per year (which represents 62% of the state’s workforce)
3. 82% believe their pay is not competitive with the private sector
4. Employees view the current pay-for-performance system as weak and ineffective
5. Younger employees are more concerned about a higher salary than retirement benefits
6. Younger employees are more mobile, self-reliant and expect their retirement benefits to come in the form of a 401(k) as they switch employers throughout their careers

More information about the survey results can be found in The Georgia Statement, Volume 9, Number 4, Winter-Spring 2007, published by the Georgia Merit System.

The Governor has already begun to address salary issues for state employees.  For example, in the 2008 budget there are three (3) components to the proposed budget request for state employee salaries – the amounts which are subject to approval of the budget:

1. 3% increase for employees who meet or exceed expectations
2. An additional ½% to address unique compensation situations
3. A multi-year statewide effort to increase pay for jobs that are below market; a request of $7.5 million is requested for the year 2008

The three possible New Hire Plan options to be considered are:

1. a lower cost defined benefit plan similar to the current New Plan
2. a defined contribution plan such as a 401(k)
3. a hybrid plan with both defined benefit and defined contribution features

Note: No decision has been made among the various options and will not be until the fiscal studies have been completed.

More information about the possible New Hire Plan options will be made available in the future.  Any questions may be submitted to the Employees’ Retirement System and to the attention of:

Michael J. Nehf, Executive Director
Two Northside 75, Suite 300
Atlanta, Georgia 30318-7778
404-350-6300
Toll Free 1-866-694-2777