PA Lawmakers OK Pension Change Bill

June 21, 2010 ( –The Pennsylvania House of Representatives has approved and sent to the state Senate a measure making significant changes to the state's two large public-sector pension plans.

The Associated Press reported that the bill would delay and smooth out a looming jump in costs to taxpayers and reduce some benefits for newly hired state workers, teachers, and other school employees.

According to the news report, under the bill:

  • Pensions would be 20% smaller, unless employees opt to have more money taken out of their paychecks.
  • The practice that lets retirees withdraw upon retirement their own contributions, plus interest, would be eliminated.
  • The standard retirement age would increase to 65, and it would take 10 years, not five, to vest.

For the Public School Employees’ Retirement System (PSERS), the lower benefits would apply to anyone hired after June 30, 2011. For the State Employees’ Retirement System (SERS), the benefits would apply to workers hired after December 31, 2010.

The Associated Press said the legislation is designed to address a sharp increase in the costs to taxpayers that is expected to occur in 2012. The bill would limit the amount of a single year’s increase in costs to governments and school districts, graduallly increasing to a cap of 4.5% of payroll.

There would also be higher minimum payments. After 2014, the state and school boards would not be allowed to pay into the system less than the so-called “normal cost” to maintain benefits.

The reduced benefits would save an estimated $25 billion, so the net effect would be a $27 billion price tag, most of it borne by taxpayers, the news report said.

SERS, which mostly benefits state government employees, had 110,000 active members and 110,000 annuitants and beneficiaries at the end of December. PSERS, which consists mostly of teachers and public school employees, had 280,000 active members and 178,000 retirees as of a year ago.