For years, Oklahoma was ranked near the bottom of the 50 states based on the unfunded liabilities of its state pension systems. But reforms that took effect a decade ago have totally changed those statistics, and experts participating in a recent legislative study told lawmakers Oklahoma is now considered a national model.

“What you did, starting in 2010 all the way to now, really is the gold standard for other states to look at,” said Caren Lock, a managing director with TIAA-CREF, a national financial services firm. “They look at you because you were able to take an unfunded liability in the 60 percentile all the way to 100-percent funded. That’s just unheard of. Other states look to you.”

During his presentation, Zachary Christensen, managing director of the Reason Foundation’s Pension Integrity Project, showed lawmakers a slide charting the market value of the Oklahoma Public Employees’ Retirement System’s (OPERS) assets (in green) and accrued liabilities (in red). The value of assets now exceeds liability.

“This is a rarity,” Christensen said. “This is very, very rare.”

Across the country, state pension liabilities are rapidly outpacing assets, he said. OPERS’ status as a fully funded state pension plan is “really important,” Christensen said.

“That means that all those priorities that I mentioned earlier about keeping promises that are made to retirees and the public workers, those are being kept,” Christensen said.

He said Oklahoma is at the “cutting edge” and “has been a leader in the country” in how it has achieved full funding of a public pension plan.

In 2011, the Oklahoma Public Employees’ Retirement System was only 66 percent funded due to reduced state funding and passage of numerous unfunded benefit increases. But as of July 1, 2024, OPERS funded status reached 102.7 percent thanks to a series of reforms.

Oklahoma lawmakers voted in 2011 to place all new state government hires into a 401(k)-style “defined contribution” plan called Pathfinder rather than the “defined benefit” plans that generated so much financial strain, and they also passed a law prohibiting unfunded benefit increases.

In 2010, the Teachers Retirement System of Oklahoma had $10.4 billion in unfunded liability and was only 47.9 percent funded. Thanks to reform, the teachers system reached a 77-percent funded ratio. The system’s unfunded liability, which totaled $10.4 billion prior to the 2011 reforms, has been cut to $6.1 billion. Where officials once expected it to take 62 years for the system to reach fully funded status, they now predict that goal will be achieved by 2035.

Oklahoma’s combined state pensions were among the nation’s worst-funded in 2007, ranking 46th nationally. The Reason Foundation now ranks Oklahoma third-best in the nation among the 50 states in its list of states with the least public employee pension debt.

However, experts told lawmakers they can still improve the Pathfinder system so that state workers are able to maximize their investments to provide for a financially sound retirement in future years.

The combined employee-employer contribution to Oklahoma’s Pathfinder system ranges from 10.5 percent to 14 percent of employee pay. While that is in the range of general best practices in the industry, Reason Foundation officials said the minimum contribution likely needs to be increased from 10.5 percent to 12 percent in the near future to better guarantee that workers’ have sufficient lifetime income upon retirement given increasing life spans.

Seven states currently have higher minimum contribution rates than Oklahoma, according to Reason’s research.

Officials also urged lawmakers to reduce the time it takes a state employee to vest in the system. Current law requires five years before a worker is vested, meaning individuals have claim to both their personal and employer contributions should they leave the system. Those who leave before five years of state employment currently receive only the share of funds they personally contributed to the system, not the employer match, and data show that nearly two-in-three people enrolled in the system have left state employment in less than five years.

Reason officials suggested the vesting period be reduced to at least three years and suggested state workers should be allowed to immediately vest in the system during year one.

Officials also urged lawmakers to provide better planning services to state workers to help them take full advantage of the investment system to secure a more financially stable retirement in the future.

“Only about 15 percent of Pathfinder participants actually are in an appropriate spot based on a target data and retirement investment glide path,” said Roderick Crane, a senior fellow at Reason Foundation's Pension Integrity Project.