Pennsylvania Passes, Signs Pension Reform Into Law
(Surrounded by Pennsylvania legislators, Governor Tom Wolf signs pension reform into law on June 12, 2017)
It's a historic day in Pennsylvania as Governor Tom Wolf has signed significant pension reform legislation into law. After years of debate surrounding the issue, the Pennsylvania General Assembly last week passed the reform legislation, SB 1, on strong, bipartisan votes.
For the past year, RSI has worked alongside Pennsylvania legislative members and stakeholders toward formulating and passing meaningful pension reform that gives workers fair, sustainable and predictable retirement benefits. Last fall, legislation that closely resembled SB 1 fell only a few votes short of legislative passage. But through collaboration and tenacity, efforts this year paid off and legislators were able to push the reform over the finish line. "It’s a job well done and demonstrates to other state and city governments that meaningful pension reform is possible," said RSI CEO Pete Constant in a press statement.
RSI has written numerous times on Pennsylvania’s growing unfunded pension liability, bringing attention to the now infamous Pension Clock, which is located in the Pennsylvania statehouse to remind both lawmakers and taxpayers of the staggering debt. Since we began writing about the issue in February 2016, the pension debt has grown from $63 billion to more than $75 billion (with $14.8 million of debt being added daily). Such significant debt threatens the solvency of public retirement plans and threatens the retirement security of all employees and retirees. As we have observed in other areas of the country, when government pension debt spirals out of control and lawmakers are unable to meet their pension obligations, it is employees and retirees who pay the price with benefit cuts.
To put the state’s pensions on a sustainable track, the new law will reform Pennsylvania’s Public School Employees’ Retirement System (PSERS) and State Employees’ Retirement System (SERS) from a defined benefit structure to a system in which future public employees have a choice between three retirement savings options, including two defined benefit/defined contribution (DB/DC) hybrid retirement plans and a defined contribution (DC) retirement plan. The bill does not affect current employees.
Aside from securing the retirement futures of the state's workers and retirees, the reform is expected to save Pennsylvania up to $1.4 billion and reduce the state’s unfunded pension liability by up to $4.2 billion over a reasonable time period.
“RSI believes that all workers deserve safe and secure futures and retirement plans should place employees on a path to a secure retirement, regardless of tenure,” said Constant in the press statement. “Pennsylvania’s pension reform package achieves that goal.”