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Reason Foundation

Pension Reform in Pennsylvania - An Update

Truong Bui
June 17, 2014, 10:18pm

A new report by the Commonwealth Foundation shows the desperate need for public pension reform in Pennsylvania and how a shift to defined contribution (DC) plans is a viable solution. The state currently faces more than $50 billion in public pension debt, thanks to large unfunded liabilities of the two major state pension systems, the State Employees’ Retirement System (SERS) and the Public School Employees’ System (PSERS). The two systems are only 60% funded, with funding ratios having steadily declined for 12 years. Full funding of the state’s public pensions in 30 years requires an estimated $7.5 billion increase in annual contribution, equivalent to $1,550 per household. In five years, pension costs as a share of General Fund expenditures will almost double (from 5% to 9.8%), crowding out important government services. 

Moving from the current defined benefit (DB) system into a DC one, as recommended by Governor Tom Corbett in 2013, could save Pennsylvania nearly $12 billion in employer contribution costs and nearly $40 billion in plan costs over the next 30 years. It would also bring about major benefits for both employees and employers:

Truong Bui is Policy Analyst

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