Senate GOP advances new effort to overhaul pension benefits
HARRISBURG — The Pennsylvania state Senate began advancing legislation Sunday night in the latest Republican effort to overhaul retirement benefits in Pennsylvania’s two big debt-saddled public pension systems.
The bill passed a committee vote on a near-party line basis in the Republican-controlled Senate, hours after a draft of the legislation became public. Senate officials hope that months of closed-door negotiations will result in speedy approval by the GOP-controlled House and Senate later this week and a signature by Democratic Gov. Tom Wolf.
Wolf’s office said he supports the bill and its goals of continuing to pay down the pension debt on the current schedule, reduce pension fund investment fees and shift investment risk away from taxpayers.
A full Senate vote was expected Monday.
Senate Republicans have tried unsuccessfully for four years to end or reduce the traditional pension benefit for future state government and public school employees in favor of a 401(k)-style benefit. The bill would create a hybrid plan, and give future hires a choice of either that or a plan made up entirely of a 401(k)-style benefit.
Bill: The bill would produce no short-term savings for the state or school districts, both which are straining under a sharp increase in pension obligation payments in recent years, in part to make up for years of delinquent payments.
If anything, pension obligations under the bill would rise slightly in the first 15 years, actuaries say. The bill would reduce retirement benefits for most new hires after 2018, while the amount that future employees pay into the system would increase under most scenarios, according to a report by the Independent Fiscal Office, a nonpartisan legislative agency that reviewed actuarial analyses of the legislation.
Long-term savings were projected to be minor. Should it pass, it would become the second pension benefits overhaul in eight years in Pennsylvania. Pennsylvania’s two big pension systems face a roughly $60 billion projected debt, among the nation’s largest.
State troopers and corrections officers hired in the future are exempt from the bill’s plan overhaul, ensuring that about one-third of eligible state government employees keep the traditional pension benefit.
Current public employees and lawmakers are not required to join one of the new plans, and Senate Republicans backed off an earlier effort to force sitting state lawmakers into the new plan upon reelection after that provision hit opposition in the House in a previous version last year. Lawmakers and current state employees may still join a hybrid plan or switch entirely to the 401(k)-style benefit plan.
Current retirees are unaffected by the bill.
About one-third of U.S. states already administer a mandatory or optional 401(k)-style retirement benefit for employees, according to the National Association of State Retirement Administrators.