"Any plan has to be well-structured and well-funded," Dave Durbin, executive director of the Pennsylvania State Employees' Retirement System, told the Senate Appropriations Committee.
As part of a package of wide-ranging pension reforms, Republican Gov. Tom Corbett advocates requiring newly hired state and school be enrolled in a plan in which they would contribute at least 6.25 percent of their salary and the state would provide a 4 percent match.
Corbett also proposes cutting future benefits for current employees to achieve nearly $12 billion in savings over 30 years, and temporarily limiting increases in taxpayers' contributions to the pension funds, which have an unfunded liability of $41 billion.
The changes would not affect people who are already retired.
Officials said the legislation is still being drafted, with help from staff members at SERS and the Public School Employees' Retirement System, which together have more than 800,000 active and retired members.
The retirement officials said the proposed new defined-contribution plan would carry some additional administrative costs, but a Corbett administration analysis released this week projects savings of $1.2 billion over three decades compared to the present system.
Several senators expressed concern about shifting the risk in the new plan from the state to the employees, whose earnings would depend largely on their investing skills and who may be tempted to withdraw the money prematurely.
"People deserve a fair pension. People deserve a fair living wage," said Sen. Jim Ferlo, D-Allegheny.
Sen. Jake Corman, the committee's chairman, pointed out that the Legislature paid nothing toward the pension funds for years when investment returns were strong and now taxpayers face the prospect of increasingly steep contributions.
"The policy question for all of us sitting here is what are we willing to pay every year?" the Centre County Republican said.
Jeffrey Clay, the PSERS executive director, made the point more emphatically.
"No one thing solves the problem," Clay said. "And the big issue here is we just need more money because we've been shorted, shorted, shorted, shorted. We've been underfunding the system for more than a decade and we continue to do so."