Clara Ritger
Pittsburgh Tribune-Review
New state employees would get a retirement plan like a 401(k) instead of a guaranteed state pension under legislation Senate Republicans are crafting.
Three members of the Senate Republican leadership said the change they’ll propose is intended to reduce the system’s cost to taxpayers. The switch from the current defined benefit plan would affect all state and public school employees hired on or after Dec. 1, 2012.
“Over the past few decades, virtually all of the private sector has shifted to defined contribution retirement plans,” Senate Majority Leader Dominic Pileggi, R-Delaware County, said. “It’s time for Pennsylvania government to do the same.”
Soaring pension costs prompted Republican Gov. Tom Corbett and key GOP leaders to look at pension reform. Their options are limited because they cannot change benefits for existing employees.
Pileggi will sponsor the legislation with Senate Majority Whip Pat Browne, R-Lehigh County; Sen. Jake Corman, R-Centre County, and Sen. Mike Brubaker, R-Lancaster County.
Erik Arneson, spokesman for Pileggi, said they plan to introduce the legislation in early June.
Corbett has identified changing the system as a top priority.
“The governor looks forward to working with Sen. Pileggi, along with members of the House working on similar legislation, in crafting a common-sense pension reform plan that will address short- and long-term debt,” Corbett’s spokesman Eric Shirk said.
“The taxpayers simply can’t afford the current system. This year, the state is paying $1.8 billion for pension obligations, and if we don’t act, that number jumps to $4.2 billion in 2016-17, leaving little room for growth in any other areas of the budget.”
Representatives of state employee unions could not immediately be reached for comment.
In 2010, Democratic Gov. Ed Rendell signed legislation designed to fix the retirement system. The law decreased future employees’ benefits and raised the retirement age to 65 for both state and school employees. It also increased the vesting period to 10 years from five.
Additionally, the legislation decreased state and school pension payments in the short term with scheduled future increases, which led many opponents to call the reform a bailout. Critics also said it fell short of substantial reform.