Senate approves public pension relief measure

Reforms would save $3 billion, reduce taxpayer burden

The Senate today approved legislation designed to provide $3 billion in savings to Pennsylvania’s public pensions while addressing an impending spike in costs for those plans, according to Senator Pat Browne (R-16), author of an amendment that significantly reforms those programs.

“These reforms will provide $3 billion in savings from current law and $39 billion from the public pension relief package approved by the House,” said Senator Browne. “This reform plan reduces the costs of Pennsylvania’s public pensions from 9 percent of payroll to 3.337 percent. Through these changes we can stabilize Pennsylvania’s public pension systems while addressing the projected substantial increases in premium costs and ease the burden that is facing local taxpayers.”

Senator Browne’s amendment to House Bill 2497 affecting the Pennsylvania School Employees Retirement System (PSERS) and State Employee Retirement System (SERS) will impact only those employees hired after the effective date of act. None of the reforms in HB 2497 will impact current employees or retirees.

HB 2497 included two key measures that are retained in the Senate-amended bill. Plan benefits will be rolled back 25 percent to pre-2001 levels and the vesting period for both SERS and PSERS will increase from five years to 10 years.

One key change included in the bill under Senator Browne’s amendment involves a “shared risk” provision. Currently, any investment loss must be made up by the employer. Under shared risk, some of those costs would be addressed through increases in employee contributions. The bill sets a contribution range for SERS of 6.25 percent to 8.25 percent; for PSERS (class T-E) of 7.5 percent to 9.5 percent; and, PSERS   (Class T-F) of 10.3 percent to 12.3 percent.

“Contribution rates would be set every three years and rates will not be reset by more than one-half percent in any one period,” Senator Browne said. “Under this plan, Pennsylvania will become one of four states which will share the risk of investment loss between taxpayers and plan participants.”

Senator Browne’s amendment also imposes the “Rule of 92” in Pennsylvania. Under that Rule, employees would have to compile a combination of age and years of service that total 92 in order to receive full retirement benefits.

“With Rule of 92, Pennsylvania will have one of the strictest full-retirement standards in the country,” Senator Browne said. “This really will only impact those employees who are hired when they are age 18 through 22. As people continue to live longer and healthier lives, this really is not a major change for the employee, but it does have a major impact on the financial stability of the system.”

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