HARRISBURG – The Pennsylvania state Senate today approved Senate Bill 1, a bipartisan measure to reform pensions for future public school and state employees, according to bill co-sponsor Senator Gene Yaw (R-23).
Senate Bill 1 moves away from the current full defined benefit system, offering a side-by-side hybrid option that pairs a 401 (k) defined contribution component with a smaller defined benefit component. Senate Bill 1 also provides new and current employees with the option of a 401 (k) defined contribution style plan. The plan also places future (new) hires in one of three retirement plan options.
Additionally, Senate Bill 1 creates a new Pension Management and Asset Investment Review Commission that will intensively work to analyze fee and cost structures and provide recommendations to both the General Assembly and SERS/PSERS on how the plan can reduce fees and overall costs effectively.
Yaw emphasized that this proposal does not make any changes whatsoever to the benefits already earned by existing employees or retirees.
“Senate Bill 1 is a historic plan that reflects the seriousness of the situation we face with pensions,” Yaw said. “The legislation takes the investment risks off of the taxpayers with regards to pensions, while shielding the retirement security of public employees from political risk.”
“If we fail to act, we are putting the state’s finances and taxpayers burdens at risk,” Yaw added.
The new options would provide greater flexibility for employees who do not spend their entire career in public service while still providing good retirement security for career workers. Most employees who leave service with 20 years or less of service time would see a better benefit under the new system than they would have earned under the current system due to the portability of the 401(k)-style plan.
Senate Bill 1 now heads to the House of Representatives for consideration.
Rita Zielonis, Chief of Staff