DALLAS – An Oklahoma Supreme Court decision upholding the state's pension reforms is a positive credit factor for the Sooner State, according to Moody's Investors Service.
Under a 2014 bill signed into law by Oklahoma Gov. Mary Fallin, new state employees would be covered by a 401(k)-style "defined contribution" plan, rather than a "defined benefit" plan provided for those already on the payroll.
The new plan shifts risk from the state to the employee. Under a "defined benefit" plan, the state commits to pre-determined payouts to retirees, regardless of the performance of the Oklahoma Public Employees Retirement System investments.
Oklahoma pension systems have $11 billion in unfunded liabilities.
"It's important we shore up our pension systems so we can pay out the benefits we have promised to our retirees," Fallin said in signing the legislation.
Teachers, firefighters and law enforcement officers are exempt under the new law.
"As with other defined contribution plans, employees will carry the investment performance risk, leaving the state and other local government employers with no liability after matching employee contributions," Moody's noted.
