Jun. 30, 2015

Plan protects current employees and ensures future budget stability

HARRISBURG – Rep. Kerry Benninghoff (R-Centre/Mifflin) today announced the House passed needed reform of the state’s public pension systems. The State Employees' Retirement System (SERS) and the Public School Employees' Retirement System (PSERS) have reached crisis status with an unfunded liability of more than $50 billion.

“The stock market crash of 2008 cost our pension system over $30 billion in losses, and while people argue who is at fault for our pension problem, the reality is it is time to address it,” Benninghoff said. “Without changes, the pension funds face insolvency, the benefits earned by current state employees, teachers and retirees are in jeopardy, and taxpayers face a growing bill.”

Under the pension reform plan, Senate Bill 1, state employees, first hired on or after Jan. 1, 2016 and school employees first hired on or after July 1, 2016, will be assigned a hybrid 401(k)-style and cash balance plan. Senate Bill 1 does not take away any benefits already earned by current employees or impact the pension benefits of current retirees.

“This reform plan keeps the promises made to retirees and existing employees, for benefits that have already been earned.” Benninghoff said. “And, by moving future employees, legislators included, to a defined contribution plan, we stop the creation of $10 billion in new unfunded liability and shield taxpayers from massive tax increases.”

All members of the General Assembly and elected officials will also be moved to the hybrid 401(k)-style and cash balance plan upon election or re-election to a term that begins after Dec. 31, 2015. Future state police, state law enforcement officers and corrections officers are exempt from the hybrid 401(k)-style and cash balance plan under Senate Bill 1, and will remain on their current benefits plan.

To address abuses that lead to the “spiking” of pension calculations, the plan also revises the benefits calculation, which will now factor in a state employee’s five-year final average salary.

“We simply cannot wait for the state’s retirement systems to fail before making changes,” Benninghoff said. “Pension obligations are the No. 1 cost driver for the state and school districts, and without reform, not only will taxes skyrocket, but dollars that could have been dedicated to programs serving our communities, helping our seniors and educating our children, will instead, continue to fund a crippled pension system.”

Senate Bill 1 is now headed back to the Senate for concurrence before going to the governor’s desk for a signature.

Representative Kerry Benninghoff
House Majority Policy Committee Chairman
171st Legislative District
Pennsylvania House of Representatives

Media Contact: Morgan Wagner
KerryBenninghoff.com / Facebook.com/RepBenninghoff