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Budget address includes significant pension reform measures | APSCUF
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By Laura Saccente, Director of Governmental Relations

Governor Corbett’s budget briefing outlined significant reform measures to Pennsylvania’s two public pensions systems: the Public School Employees’ Retirement System (PSERS) and the State Employees’ Retirement System (SERS).

Details on the plan have not been fully vetted, but a framework has emerged. Several components of the pension reform plan are as follows:

 

 

1) Future employees will be put in a 401(k)-like plan after 2015. Enrollment will be automatic. Employees will be required to contribute at least 6.25 percent (7.5 percent for PSERS) of their salary to the plan. An Employer Contribution Rate has not been detailed.

2) Current employees above the 2 percent multiplier will see a .5 percent reduction in their multiplier for future benefits. Those wishing to remain at 2.5 percent will have to contribute a higher amount.

3) Current employees will have their final salary computed over the last five years as opposed to the best three years of service.

4) There will be modifications to option 4 (the option that allows retirees to withdraw accumulated deductions).

5) Pensions will be capped on social security wages at the current level of $113,500.

6) The collars put into place with the enactment of Act 120 of 2010 will be scaled back to 2.25 percent.

APSCUF is concerned these reform measures exacerbate the problem instead of sticking to the payment plan as scheduled in Act 120. Scaling back the collars will delay needed pension reform by taking away a potential $1 billion dollars that could be used to fix the problem and kicks the can down the road for a future administration. Creating a mandatory 401(k)-like plan will destabilize the current pension system for active employees and will result in a direct negative impact on the hiring/recruitment of future hires.

APSCUF believes these pension reform measures are premature and that Governor Corbett needs to allow Act 120 to work.  Significant reform measures to reduce the multipliers, increase vesting, modify Option 4, increase normal retirement age and impose a cap on benefits were already achieved through the passage of Act 120.   These proposed reformed measures will only result in long court challenges as they will be constitutionally challenged.

Approximately 25 percent of APSCUF members have a SERS retirement plan and 8 percent are enrolled in PSERS. APSCUF will keep its membership notified as more details on the plan emerge.