2015-12-16 / State

Bill overhauling state, school pensions hits home stretch

By MARC LEVY
Associated Press


Gov. Tom Wolf has agreed to sign a bill to overhaul pension benefits for Pennsylvania state government and public school employees that would create a mandatory 401(k)-style benefit for future hires combined with a traditional benefit that is halved. 
AP Photo/Marc Levy Gov. Tom Wolf has agreed to sign a bill to overhaul pension benefits for Pennsylvania state government and public school employees that would create a mandatory 401(k)-style benefit for future hires combined with a traditional benefit that is halved. AP Photo/Marc Levy HARRISBURG (AP) — Republican lawmakers’ longsought legislation to overhaul pension benefits for Pennsylvania state government and public school employees received what could be its final changes Tuesday before it becomes law.

One change to the bill would help lawmakers keep their existing pension benefit.

Several amendments in the House State Government Committee followed the Senate’s passage last week of a compromise bill that would create a mandatory 401(k)-style benefit for future hires, combined with a traditional pension benefit that is halved.

The committee vote was party line, with Republicans framing it as a step toward limiting the potential to roll up more pension debt, even if there is no guarantee that the proposed new plan ultimately will be less costly.

“That’s where we’re shifting risk to say, ‘You spend a little bit more now to set up the other plan, but it shifts the risk so you don’t have these unfunded liabilities to the same degree that you have them now in the future,”’ House State Government Committee Chairman Daryl Metcalfe said.

About one-third of the states already administer a mandatory or optional 401(k)-style retirement benefit for employees, according to the National Association of State Retirement Administrators.

Critics said the plan envisioned by the bill would be administratively complex and maintain the potential for underfunding by not shifting to a fullblown

401(k)-style benefit. Democrats, who had opposed a move away from the traditional pension benefit plan, criticized the bill as committing no money to pay down the state’s approximately $55 billion pension debt.

State pension officials had estimated that the Senate’s legislation, before House changes, would save about $2.5 billion over 30 years on payments totaling nearly $200 billion. Some of those savings stem from proposed new limits on current employee benefits. But those savings could be wiped out if labor unions follow through on threats to sue over the constitutionality of reducing benefits for current employees.

Gov. Tom Wolf has agreed to sign the bill as part of a wider budget agreement that guarantees a record spending increase for public schools.

Sen. Pat Browne, who authored the pension legislation in a compromise with Wolf’s office, said the Senate would have to discuss whether to accept the House’s changes.

One House amendment would help ensure that lawmakers and other elected officials get to keep their existing pension benefit, and allow all public employees the opportunity to join the proposed new retirement benefit plan.

The Senate had initially sought to push elected officials into the proposed new plan upon re-election. But House officials raised questions about the provision’s legality.

To address those protests, the Senate created a provision to allow elected officials to opt out of the new plan, and back into the existing plan, after re-election. House members on Tuesday changed it to allow themselves, as well as all other elected officials and current public employees to voluntarily opt in to the proposed new plan.

Another House amendment would remove the Senate’s proposal to artificially lower next year’s state pension obligations by about $170 million. Payments are already scheduled to rise next year by hundreds of millions of dollars as the state continues to make up for skipped payments in past years.

Browne said he wants to hear from House leaders about where they will find the money to accommodate that change.

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