HARRISBURG (June 4, 2017) Sen. Wayne Langerholc, Jr. (R-35) offered a comprehensive amendment to Senate Bill 1 in the Senate Appropriations Committee meeting today which amounts to a historic pension reform package. As amended, SB 1 is projected to save significant dollars over the next 20 years and protect taxpayers from over $6.5 billion in additional payments if state investments fall short of projections.
The bill was hailed by outside analysts as the biggest reduction in taxpayer risk in the country, considerably more than any other state in the nation that has tackled pension reform.
Based upon the provisions of last session’s conference committee report, and like most private-sector pension plans, Senate Bill 1 will move public sector employees away from the fully defined benefit system to a hybrid plan that combines both a 401(k)-style component and a smaller defined benefit component.
To be clear, pension benefits of current employees and retirees will not be affected. The new plan applies to new hires only; however, current employees could choose to opt into the program.
“I’ve been committed to pension reform, and I look forward to being one of the first in line to elect the 401(k)-style defined contribution plan that many of our constituents have,” Langerholc said. “I fully believe others will do the same.”
New hires would be given a choice of one of three retirement options: 1) a full 401(k)-style option; 2) a defined benefit/defined contribution hybrid with a 1.0 multiplier at a lower employee costs; or 3) a defined benefit/defined contribution hybrid with a 1.25 multiplier at an increased employee cost.
Analysts show that design changes of the proposed plan, on their own, would reduce risk by 60 percent or more, including the employee contribution cost-sharing.
The bill would also create an investment review commission and will challenge the two funds to target at least $1.5 billion in additional fee reductions and savings.
“Today, college graduates who are looking for jobs often admit that they don’t intend to stay in one job their entire career. The inability to transfer any earned retirement from a state job is a deterrent to attracting otherwise qualified, young individuals. Offering this portability is more in line with the vast majority of other employers, and will increase our ability to attract the best and brightest into our state workforce.”
“The time to address the pension spiral is long overdue,” Langerholc said. “I am pleased we can honor our obligation to current retirees, while also honoring and recognizing our obligations to our taxpayers.”
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