Pennsylvania Senate Approves Pension Overhaul

The Pennsylvania Senate on Monday passed a bill that would bring big changes to the state pension system.

The bill close off the state’s defined-benefit system to new hires, and would put those employees in a hybrid, 401(k)-style system.

State Gov. Tom Wolf said he would sign the bill; but it first goes to the House, where its fate is uncertain.

From PennLive:

For school teachers hired after July 1, 2017 and state workers hired after Jan. 1 2018, the bill creates a new, two-track pension plan that combines a reduced guaranteed benefit based on years of service and final salary at retirement with a separate 401(k)-style component.

It also will change some rules pertaining to current employees, though the basic form of their pension plan would not change.

[…]

The new benefit would cut the current “defined benefit” pension formula in place for workers hired since 2011 in half, essentially guaranteeing new hires 1 percent of their final salary for each year served as opposed to the 2 percent multiplier in place now.

That would be paired with a mandatory 401(k)-style piece, into which the state would contribute the equivalent of 2.5 percent of an employees’ salary to their personal retirement account.

Between the two components, school district employees hired under the new plan would contribute 7.5 percent of their salaries to their retirement. Affected state workers would contribute 6.25 percent.

There is a carve-out for “hazardous-duty” workers, including state police, corrections officers, game wardens and park rangers, for whom the current defined-benefit plans would continue.

The bill is part of a larger budget deal that lawmakers are eager to pass. The state has been in a budget stalemate for months.

Photo by Governor Tom Wolf via Flickr CC License