"An Act relating to contribution rates for employers and members in the defined benefit plans of the teachers' retirement system and the public employees' retirement system and to the ad-hoc post-retirement pension adjustment in the teachers' retirement system; requiring insurance plans provided to members of the teachers' retirement system, the judicial retirement system, the public employees' retirement system, and the former elected public officials retirement system to provide a list of preferred drugs; relating to defined contribution plans for members of the teachers' retirement system and the public employees' retirement system; and providing for an effective date. "

House Bill 238 creates a mechanism to help non-State and non-School District employers pay their portions of the Public Employees Retirement System (PERS) unfunded liability. Unassisted, the $3.2 billion unfunded liability of PERS will result in unsustainable employer contribution rates of up to 30%. The legislature recognizes that making such high payments would require many municipalities to cut basic services. In response, HB 238 proposes the creation a Past Service Cost Offset Account (PSCOA), which would make annual payments towards the past service cost of employers. To make these payments over the next 25 years would require an up-front deposit of approximately $380 million (according to 2004 numbers).

Under the bill, payments from the PSCOA would be linked to the employer's total number of defined contribution (Tier IV) employees. The following equation shows how these contributions on behalf of municipal employers would be calculated.

(employer's PSC rate) * (wage base * No. of Tier IV employees) = PSCOA payment

Although defined contribution employees do not individually have any unfunded liability associated with them, all previous proposals used the employers entire wage base for calculation of contribution rates and HB 238 continues this format.

Many employers have higher than average past service cost rates due to poor financial decisions in the past or the composition of their workforce. State PSCOA payments to the PERS pension fund, made on behalf on the employers is limited under HB 238 to the average past service cost rate for all non-State and non-school PERS district employers.

HB 238 proposes a long-term solution to assist communities with the growing unfunded liability payments. Creating a mechanism that aids employers as new defined contribution hires enter the workforce allows them to handle the complexities of a changing labor market and maintain much needed community services. Over the course of the 25-year amortization period the PSCOA would reduce non-State and non-school district employer past service cost contributions by approximately 56%.

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