- Reform of the Pennsylvania Public School Employees’ Retirement System (PSERS) and the State Employees’ Retirement System (SERS) move one step closer on May 13. The state senate in a 28-19 vote approved SB 1, the measure that would reform the systems. It now is before the House for further deliberation.
The bill argues that the tax hikes it would take to address the systems’ increasing obligations would not only be a heavy burden on Pennsylvanians, but they also would impair the state’s ability to provide vital public health, safety and welfare services. The text of the legislation calls it “imperative” that the Commonwealth adopt reforms that will maintain the financial health of the state and its school districts.
The bill says that the reforms it contains are intended to use resources “judiciously” and enable Pennsylvania to provide retirement security for state and school employees while at the same time reducing the burden on taxpayers. It also notes that reforms it would make to retirement benefits would be prospective and would not affect benefits earned before the effective date of the measure.
The changes the bill would make to PSERS and SERS include:
1) establishing a defined contribution plan applicable to most new members of both PSERS and SERS;
2) adding a cash balance retirement benefit tier to the existing defined benefit structure that will be mandatory for new members and optional for pre-2016 active members;
3) modifying the future benefit entitlements of current members of both PSERS and SERS;
4) creating a new class T-I, with mandatory participation in a DC and CB hybrid and no DB participation;
5) giving employees hired before and after 2010 different options: pre-2010 employees may elect to add the CB option to their DB account, and post-2010 employees may elect to join both;
6) establishing a Public Pension Management and Asset Investment Review Commission that would study current performance and alternative strategies; and
7) granting each active member contractual rights, including the right to timely annual employer contributions and jurisdiction being placed with the state Supreme Court, with sovereign immunity waived.
A variety of factors affect the bill’s prospects. The Senate vote was largely along party lines, with all but one Republican voting in favor and every Democrat voting against. It now travels to the House for further deliberation, where its fate is not yet clear. In addition, according to local news reports, Gov. Tom Wolf (D) does not support the measure — and even enactment may not settle things, since some lawmakers argue that the bill could be unconstitutional.
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