Lawmakers considering measure to end pension pickups

Lawmakers are considering ending so-called pension pickups, which proponents said would increase transparency and also help with local governments’ budgets.

House Bill 473 would prohibit Ohio governments from covering the employee portion of retirement contributions to state pensions.

In prepared testimony to the Ohio House Public Insurance and Pensions Committee, Zachary Christensen, managing director of the Pension Integrity Project at the Reason Foundation, said House Bill 473 “addresses a common issue found among public employee retirement plans.”

Christensen told lawmakers that regular contributions are typically split between the employee and employer. Ohio Public Employees Retirement System employees generally contribute 10% of their paycheck, while employers contribute about 14% of a member’s pay, Christensen said.

“In an effort to compete for high-value workers, some local employers offer to cover all or part of an employee’s retirement contributions, a practice commonly known as a ‘pickup,’” Christensen said in prepared testimony. “While the intent of this strategy is honorable—it is in the public’s interest to have experienced and capable government employees—the practice distorts the cost and the purpose of a collaborative retirement plan.

“…As local governments compete for the best public employees, they should do so using clear, transparent, and undistorted compensation,” Christensen added. “By banning the practice of pickups for Ohio’s public employers, HB 473 would ensure that pension contributions are transparent and in line with the goals of shared responsibility, all while not hurting local governments’ ability to offer attractive compensation packages to remain competitive with today’s workforce.”

Unsurprisingly, unions and associations oppose the measure.

In written testimony, Adam Schwiebert, managing director of policy for the County Commissioners Association of Ohio said the group opposed the measure because it “would remove an important tool that counties may need to recruit and retain qualified employees in an increasingly competitive labor market.”

“Counties today face significant challenges attracting and keeping skilled workers,” Schwiebert told lawmakers. “Public sector employers often cannot match the wages offered in the private sector, especially for specialized positions in areas such as engineering, information technology, or finance.

“Pension pickup arrangements, while used sparingly, provide counties with one additional mechanism to make public employment more competitive without the need for large salary increases,” Schwiebert added. “Eliminating this option would further limit local flexibility at a time when counties are already struggling to fill critical positions.”

However, Greg R. Lawson, a research fellow at The Buckeye Institute, a Columbus-based think tank, said the approach “puts public employees far ahead of private-sector employees who must make their own retirement contributions to receive employer matching funds.”

“There are concrete fiscal consequences for such “pension pick-up” arrangements,” Lawson said in prepared testimony. “What may seem a small bargaining concession becomes an expensive long-term, recurring liability that erodes local budgets.

“A pension pick-up compounds as salaries grow, payrolls expand, and inflation rises,” Lawson added. “The additional costs divert money from public services that taxpayers expect or require property tax hikes that taxpayers don’t. That concern lies near the center of Ohio’s current debate over property taxes and whether to abolish them altogether. Pension pick-up plans are just the sort of opaque and expensive public perk that has fueled taxpayer frustration.”