GOP senators to introduce PA pension reform bill
Would move all future employees to 401(k) plans
By Eric Boehm | PA Independent
HARRISBURG — Future state and public school employees will not be eligible for the state's existing public pension system that is more than $35 billion in the red under legislation that was announced by top GOP senators on Tuesday.
Following weeks of open discussion on the need to reform Pennsylvania’s pension systems in the face of exploding costs, four Republican senators said they would introduce the legislation to do so before the end of June.
The proposal would move all employees hired after Dec. 1, into a new pension plan that would operate like a 401(k) plan instead of the existing defined-benefit system, which provides pensions on a formula of years worked, highest salary and a multiplier based on position.
"Over the past few decades, virtually all of the private sector has shifted to defined-contribution retirement plans," said Senate Majority Leader Dominic Pileggi, R-Chester. "It's time for Pennsylvania government to do the same."
Opponents of the switch have warned in the past that moving to a defined-contribution plan will do little to alleviate the rising costs in the existing pension system, because those benefits have been earned by existing employees.
Pennsylvania is going to pay about $1.7 billion to pensions next year, a figure that will climb to more than $4 billion by 2016.
“A switch to a defined-contribution plan will benefit Pennsylvania taxpayers by forcing fiscal discipline," said state Sen. Jake Corman, R-Centre. "Retiree benefits will become predictable and sustainable, costs will be easily defined, and future liabilities will be fully funded. It's an excellent choice prospectively."