Pa. Official Calls for Consolidation of Municipal Plans

September 19, 2012 (PLANSPONSOR.com) – Pennsylvania Auditor General Jack Wagner proposed that the state’s 2,600 municipal pension plans be consolidated into a statewide system.

Wagner said that consolidation would yield higher investment return rates for municipal employees, reduce administrative expenses and help reduce the need for increased contributions from taxpayers.   

“Pennsylvania has too many small and underfunded municipal pension plans that could cost taxpayers millions of dollars to maintain,” Wagner said. “Consolidation is the best way to preserve benefits for retirees and future retirees while protecting taxpayers from higher tax bills they can’t afford.”  

Wagner said the General Assembly should consider consolidating local government pension plans into a statewide system for different classes of employeespolice, firefighter and non-uniformed. An alternative solution would be to maintain the existing system of individual pension plans but consolidate their administration into one entity, such as the Pennsylvania Municipal Retirement System or the State Employees’ Retirement System. 

Wagner made his comments after presenting the Public Employee Retirement Commission with a new report completed by the Department of the Auditor General, which showed that 36% of the state’s municipal pension plans are considered distressed. The special report is available to the public at www.auditorgen.state.pa.us. 

The report shows that 52, or 2%, of the plans are seriously underfunded, with less than 50% of their plan liabilities covered. Those 52 plans, which are classified as severely distressed, could place an even greater tax burden on many Pennsylvania taxpayers, Wagner said.  

Wagner also said that the General Assembly should consider amending the formula for the allocation of General Municipal Pension System State Aid funding to ensure that distressed pension plans receive additional funding when properly managed.

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