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Pennsylvania House of Representatives
05/20/2024 05:50 PM
Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?SPick=20130&chamber=H&cosponId=14507
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House of Representatives
Session of 2013 - 2014 Regular Session

MEMORANDUM

Posted: April 8, 2014 04:19 PM
From: Representative Mike Tobash
To: All House members
Subject: Hybrid State Pension Design
 
Through extensive work with House Leadership, my colleagues Warren Kampf and Chris Ross, the Public Employees Retirement Commission, Senate members and the Office of the Budget Secretary, I will be introducing a plan to address the Commonwealth’s pension crisis. This proposal is designed to deal with three critical areas:
  1. Shifting risk of future pension obligations away from taxpayers.
  2. Reducing the underfunding that exists in our current system.
  3. Addressing current budgetary concerns of the Commonwealth and local taxing districts.
The plan will be established for new employees entering the state system and DOES NOT change benefits for existing participants and/or retirees.

In this 2013-14 fiscal year our total employer pension contribution is approximately $3.4 billion. Under our current law and amortization schedule, that figure will move upwards to about $6.6 billion by the year 2018-19. An increase of more than $3 billion is equivalent to about 60,000 jobs. Our willingness to address this issue will directly affect our ability to maintain these jobs.

The elements of the plan are designed to keep the percentage of pension cost compared to payroll at a level that is affordable, focus Commonwealth resources on the Unfunded Accrued Actuarial Liability, and maintain a liquidity ratio that allows investment diversity.

The plan includes a limited defined benefit, guaranteed retirement income at lower salary levels, along with a defined contribution 401(K)-type plan. Restrictions on when benefits can be accessed and how long an employee can participate in the defined benefit option of the plan also exist in order to lessen the fiscal liability to taxpayers in future years.

Our State’s ability to offer new employees adequate benefits in their retirement and pay the deferred compensation earned by current and retired employees depends on our ability to act NOW.

We will give special attention to our Pennsylvania State Police who currently do not participate in the Social Security system by offering an attractive Social Security replacement benefit.

I ask and look forward to your support in this effort to address the financial stability and future of this great Commonwealth and welcome the opportunity to discuss and better inform you of the specifics of this pension reform proposal.