HB 1642
In CommitteeHouse
Pension plan choice
Providing additional plan choice to members of the teachers' retirement system plans 2 and 3, the school employees' retirement system plans 2 and 3, and the public employees' retirement systems plans 2 and 3.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill gives certain older public school and state employees the chance to switch from TRS/SERS/PERS Plan 3 to Plan 2, and changes the default retirement plan for new hires to Plan 2 instead of Plan 3. It also closes a loophole that previously excluded some retirees from making such a switch.
- Allows certain TRS Plan 3 members hired between July 1, 1996, and June 30, 2007 to irrevocably switch to Plan 2 during any January after the bill takes effect, if they earn service credit that month.
- Allows certain SERS Plan 3 members hired between September 1, 2000, and June 30, 2007 to irrevocably switch to Plan 2 during any January after the bill takes effect, if they earn service credit that month.
- Changes the default retirement plan for new public employees (PERS) from Plan 3 to Plan 2 for those hired on or after January 1, 2026, if they do not choose within 90 days of hire.
- Changes the default retirement plan for new teachers (TRS) and classified school employees (SERS) from Plan 3 to Plan 2 for those hired on or after July 1, 2020, if they do not choose within 90 days of hire.
- Bars retirees from transferring from Plan 3 to Plan 2 under this bill.
Who is affected
- Current TRS Plan 3 members hired between 1996 and 2007 — Teachers who were hired between July 1, 1996, and June 30, 2007, and enrolled in Teachers' Retirement System (TRS) Plan 3 without being given a choice between Plan 2 and Plan 3. They gain one-time opportunity to switch to Plan 2 during any January after the bill takes effect, as long as they earn service credit that month.
- Current SERS Plan 3 members hired between 2000 and 2007 — School employees (e.g., clerical, maintenance, food service staff) hired between September 1, 2000, and June 30, 2007, who were enrolled in School Employees' Retirement System (SERS) Plan 3 without a choice. They gain one-time opportunity to switch to Plan 2 during any January after the bill takes effect, as long as they earn service credit that month.
- New public employees hired on or after January 1, 2026 — Public employees (e.g., state agency workers, higher education staff) hired on or after January 1, 2026, will now have their default retirement plan changed from Plan 3 to Plan 2 if they do not make an election within 90 days of hire.
- New teachers and classified school employees hired on or after July 1, 2020 — Teachers and school employees newly hired on or after July 1, 2020, who previously defaulted into Plan 3, will now default into Plan 2 instead if they do not choose within 90 days of hire.
- Retired members of TRS, SERS, or PERS Plan 3 — Retired members of TRS, SERS, or PERS Plan 3 are barred from switching to Plan 2 under this bill.
Pro/Con Analysis
Potential Benefits (5)
Teachers and school employees hired between 1996–2007 (TRS) and 2000–2007 (SERS) who were denied plan choice now gain a one-time opportunity to switch to Plan 2, which offers more generous defined-benefit formulas—potentially increasing their retirement security and reducing poverty risk in old age.
FinancialPeopleRef: Sec. 1(1), Sec. 3(1)New public employees (state, higher ed) hired on or after Jan 1, 2026, and new teachers/school staff hired on or after July 1, 2020, will now default to Plan 2, which offers more predictable lifetime benefits than Plan 3’s hybrid structure—benefiting workers who may not actively choose a plan and are at risk of under-saving under a defined-contribution-heavy plan.
FinancialPeopleRef: Sec. 5(1)(b)Higher retirement benefits for affected workers may improve their ability to afford stable housing in retirement, especially for those without other retirement savings—reducing housing insecurity among aging educators and school staff.
HousingPeopleRef: Sec. 1(1), Sec. 3(1)By clarifying plan defaults and offering a one-time opt-in, the bill may improve recruitment and retention of public employees—particularly in education and state service—by offering more attractive retirement benefits, though this effect is likely modest given broader labor market dynamics.
Business & EmploymentPeopleRef: Sec. 1(1), Sec. 3(1), Sec. 5(1)Teachers and school employees who were previously locked into Plan 3 without choice now have a path to a more stable retirement benefit, potentially improving morale and reducing turnover among mid-career educators who are concerned about long-term financial security.
EducationPeopleRef: Sec. 1(1), Sec. 3(1)
Potential Concerns (5)
The bill allows certain Plan 3 members to switch to Plan 2, which generally provides higher defined-benefit payouts for long-tenured employees, increasing state pension liabilities and long-term unfunded liabilities—costs ultimately borne by taxpayers and future generations through higher taxes or reduced public services.
FinancialPeopleRef: Sec. 1(1), Sec. 3(1), Sec. 5(1)Retirees are categorically barred from switching to Plan 2, locking them into potentially less favorable benefit structures despite having contributed under Plan 3—denying them equal access to plan choice already granted to active workers.
Rights & LibertiesPeopleRef: Sec. 1(3), Sec. 3(3), Sec. 5 (no provision for retirees)The bill includes a legislative reservation clause allowing the legislature to modify or discontinue the transfer right at any time, undermining the irrevocable nature of the benefit and creating uncertainty for participants who rely on the promise of plan choice.
Rights & LibertiesPeopleRef: Sec. 1(2), Sec. 3(2), Sec. 3(3), Sec. 5 (legislative reservation clause)By shifting new hires into Plan 2 by default, the bill may reduce employer (i.e., state/local government) contributions in the short term, potentially leading to budget reallocations away from public safety staffing, equipment, or training if overall pension costs rise unexpectedly.
Public SafetyLean peopleRef: Sec. 1(1), Sec. 3(1), Sec. 5(1)Local governments (school districts, cities, counties) that employ teachers, classified staff, and public employees may face higher employer contribution rates under Plan 2 compared to Plan 3 for new hires, straining already tight local budgets and potentially reducing funds for classrooms, infrastructure, or social services.
Local GovernmentPeopleRef: Sec. 1(1), Sec. 3(1), Sec. 5(1)
Who Is Most Affected
Teachers and school employees hired between 1996–2007 (TRS) and 2000–2007 (SERS) who were denied plan choice will gain a one-time opportunity to switch to Plan 2, significantly improving their retirement benefit projections. This group is disproportionately affected and stands to benefit the most.
New public employees (state, higher ed) and teachers/school staff hired after 2020/2026 will now default to Plan 2, which offers more predictable lifetime benefits than Plan 3. This improves retirement security for new hires, especially those who do not actively choose a plan.
Retirees are explicitly barred from switching to Plan 2, locking them into their current benefit structure regardless of its adequacy. This group is negatively impacted as they lose any opportunity to improve retirement outcomes.
Local governments (school districts, cities, counties) will face higher employer contribution rates under Plan 2 for new hires, potentially diverting funds from instructional or operational budgets. This creates fiscal pressure on already constrained local budgets.
The state treasury and general fund will bear increased long-term pension liabilities as more members opt for or default into Plan 2, which has higher projected costs. This increases fiscal risk and could lead to future tax increases or service cuts.