Last week the WSJ (paywall) reported on Pennsylvania’s PERS reform legislation. Not surprisingly, the reform moves toward 401(k) type retirement benefits as opposed to the soon-to-be-extinct pension system. From the article:
The compromise measure will move most future state and public school workers at least partly into 401(k)-style plans to help shore up the deeply underfunded pension system and shift market risk from taxpayers to employees….
Current and retired employees will remain under the traditional “defined benefit” pension that provides set retirement payments. The two pension systems for state and public school employees have about 863,000 active, vested and retired members. The new law won’t apply to state troopers or correctional officers….
Critics of the legislation say it would do little to address the state’s roughly $62 billion in existing pension debt.
“Pension debt is the sole reason for doing pension reform and yet, ironically and bizarrely,” the bill doesn’t address existing unfunded liabilities, Republican state Rep. John McGinnis said during a recent debate. “We’re not making history, we are repeating it.”…
Republican House Speaker Mike Turzai acknowledged the state isn’t likely to see major savings for years under the pension overhaul, but said it is time to follow the private sector into 401(k)-type retirement plans, where the market determines future benefits.
“At a certain point you’ve just got to turn off the spigot, and you’ve got to move to where the private sector’s been,” he said in a video on his website.
His office says 18 states have enacted some 401(k)-style plan for state workers, and notes that the state’s Independent Fiscal Office estimates pension payments by Pennsylvania taxpayers will account for nearly 10% of the state’s general fund budget by 2019.
That’s where we’re headed. Everyone knows it. The longer we wait the worse it will be for current retirees and participating employees.