Skip to main content

You are here

Advertisement


PA Independent Fiscal Office Evaluates Teacher Pension Funding Bill

The Pennsylvania Independent Fiscal Office has issued an evaluation of a bill that would change the financing of the state retirement plan for school employees. It concludes that the measure would change its financing but would leave benefit provisions intact.

The Independent Fiscal Office on May 9 issued an actuarial note on HB 778.

Rep. John D. McGinnis (R-Altoona) introduced H.B. 778 exactly two months earlier; it is before the House State Government Committee. The bill would, beginning July 1, 2017, accelerate the amortization of the unfunded accrued liabilities of the Public School Employees’ Retirement System (PSERS) and the State Employees’ Retirement System (SERS) by:

  • computing the unfunded liabilities using the market value of assets;

  • providing for a fresh start amortization of the unfunded liabilities; and

  • providing a schedule of payments that would amortize the unfunded liabilities over approximately 20 years, based on a schedule of payments increasing at specified rates.

HB 778 also would require that the differences between plan experience and actuarial assumptions be funded in level dollar annual contributions over 20 years. The bill would make no changes to the benefit provisions of current or future plan members.

The Independent Fiscal Office report says that the bill would save Pennsylvania, on a cash flow basis, $18.2 billion in employer contributions through fiscal year 1949-50, equivalent to $5.1 billion in savings at a present value of 3.6%.

The bill would increase employer contributions by $2.5 billion on a cash flow basis for the first five years after enactment; they would further increase by $8.3 billion on that basis for fiscal years ending between 2023 and 2035, the report projects. After that, savings would accumulate for the next 15 fiscal years as employer contributions were cut by $28.9 billion on a cash flow basis, or $12.6 billion at a present value of 3.6%.

HB 778 is not the only measure in the Keystone State legislature that concerns public employees’ retirement benefits. McGinnis also introduced H.B. 779, a measure that would establish a mandatory defined contribution plan for all public employees and appears to block new participation in local supplemental savings plans as well, on the same day he introduced HB 778.