SAN JOSE, Calif., June 8, 2017 — The Retirement Security Initiative (RSI) today commended the Pennsylvania Legislature for passage of SB 1, a pension reform bill that will save state taxpayers billions of dollars and safeguard retirement benefits for public workers. SB 1 passed the Pennsylvania Senate on Monday on a 40-9 bipartisan vote and passed the House today on a 143-53 bipartisan vote. It now heads to Governor Tom Wolf’s desk for his signature.
Pennsylvania’s unfunded pension liability is currently 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, SB 1 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 and exempts state police, corrections officers, and other hazardous duty personnel. The new plans will apply to employees beginning in 2019; January 1 for PSERS and July 1 for SERS.
“This pension reform package is a significant policy achievement,” said RSI CEO Pete Constant. “It will help Pennsylvania meet its existing retirement commitments to public employees and retirees, addressing its substantial unfunded pension liabilities, while providing a new retirement structure that is both more sustainable and provides adequate retirement security for all workers, regardless of tenure.”
Over the 30-year amortization period, the legislation is expected to save up to $1.4 billion and is also expected to reduce the current unfunded liability by up to $4.2 billion. Importantly, the legislation will reduce future risk to taxpayers by more than 50 percent.
“Pennsylvania’s pension funds lost $115 billion in funding, taking a $20 billion surplus in 2000 to a $75 billion deficit in 2017,” said Constant. “Without substantial reform, Pennsylvania would not be able to meet its commitments to current employees and retirees and the debt would continue to increase.”
With national unfunded pension liabilities in excess of $1 trillion, traditional defined benefit pensions are straining the finances of state and local governments across the country. RSI believes that state governments have an obligation to fix this growing problem by ensuring that their retirement plans are sustainable, fiscally sound and responsibly managed so that all retirees and employees get paid what they have earned.