Some practitioners see modernization as an advantage that will speed turn around time for requests for rulings and determination letters and may also create a group of IRS employees who are familiar with the special nature of governmental plans. However, the bonds will not be issued until interest rates are at a level that would result in fixed payments which are less than the current annual payment schedule recommended by the State Actuary. The expected annual savings is the difference between the projected annual contributions on the 40 year plan and the fixed debt service on the pension obligation bonds. Other governments have used pension obligation bonds to shore up their retirement systems funding. A number of states looked at the issue and a few actually created new DC plans.
All new plans are optional and most are targeted to a narrow band of employees.
No K-12 teachers are affected by the changes. An optional DC plan was created for members of the Public Employees Retirement System. Existing employees will have 12 months to decide whether to remain in the DB plan or transfer to the new DC plan. New employees will be placed in the DB plan, but have the same time period in which to decide whether to transfer. If they fail to choose by the deadline, they will remain in the DB plan.