New Pa. pension plan rising from GOP ranks

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HARRISBURG -- A new plan from a House Republican to overhaul state and school employee pensions received a muted response Monday from fellow officials while so far avoiding the outcry from labor that greeted an earlier proposal from Gov. Tom Corbett.

Rep. Glen Grell, R-Cumberland, who co-chaired a House Republican task force on pensions, unveiled his proposal to pay down the unfunded liability -- estimated at more than $45 billion -- of the two statewide pension systems while harnessing the rise of employer contributions in coming years.

He made clear that the plan, which has yet to be introduced as legislation, is not an official House Republican proposal. But after a push by Mr. Corbett this spring for pension legislation, aides to Republican leaders in both chambers have said efforts to revise the retirement systems are expected to be considered this fall.

And while leaders of public employee unions, with whom Mr. Grell consulted, did not endorse the plan, they reacted with considerably more restraint than they had to the Corbett proposal, which would have diverted new employees into a 401(k)-style defined contribution plan while imposing mandatory changes on the plans of current workers.

The proposal from Mr. Grell has three main components. It would enroll new employees in a "cash balance" plan, with fixed employee and employer contributions and a guaranteed 4 percent interest rate. If investments yielded a greater return, the additional earnings would be split equally between employee and employer.

It would commit the state to paying into its pension funds by borrowing up to $9 billion, an infusion Mr. Grell said could reduce the unfunded liabilities of the Public School Employees' Retirement System and State Employees' Retirement System by $15 billion over 30 years.

Instead of mandatory changes for current workers -- a proposal that drew promises of lawsuits from labor unions and hesitance from Republican proponents of pension overhaul -- those employees would be offered the incentive of a lower contribution from their paycheck in return for agreeing to two changes. Their benefit would then be calculated using their five highest-salaried years, rather than three, and the payments involved in an optional lump-sum withdrawal at retirement would be recalculated to become actuarially neutral.

Labor leaders were reserved in their comments but expressed support for discussing plans that would not move new hires into defined contribution plans.

"At the very least, Rep. Grell's ideas present an interesting new framework for discussions about pension funding and retirement security," Mike Crossey, president of the Pennsylvania State Education Association, said in a statement.

David Fillman, executive director of AFSCME Council 13, whose members include state workers, commended Mr. Grell for talking with the unions and considering a new option. Both union leaders said they need to learn more about the proposal.

Steve Miskin, a spokesman for House Republicans, said both Mr. Grell's plan and a proposal to enroll new hires in a defined contribution plan are worth considering. He said the House is expected to consider pension legislation on the floor this month.

Senate Republican spokesman Erik Arneson said there is support in that caucus for moving new employees into a 401(k)-style plan but that they would review Mr. Grell's proposal as well.

Jay Pagni, a spokesman for the governor's budget office, said the administration will work with Mr. Grell and others on pension legislation. He noted that both Mr. Corbett and budget secretary Charles Zogby have said they would not support taking on more debt to pay down the liabilities of the pension systems.

state

Karen Langley: klangley@post-gazette.com or 1-717-787-2141.


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