Jun. 06, 2017
Rep Steve Mentzer (R-Lititz)
Since I first took office, I have been pushing to reform the state employee’s pension system. I thought it would be interesting to readers if I provided a brief history.
During my first term, I co-sponsored and was an advocate for House Bill 922
which was a companion bill to Sen. Brubaker's senate bill. This would have simply done what the overwhelming majority of businesses have done to reform their pensions over the past several decades. We would honor all public service employees benefits accumulated to a certain date. After that point, all employees would be placed in a 401(k)-style pension. It was extremely disappointing to me that this reform could not gather the necessary support in the House.
In an effort to compromise, we changed the proposal and presented legislation that took all new employees, plus elected officials, and placed them in a 401(k)-style benefit pension system. Fortunately, this passed both the House and the Senate. But, when it was sent to the governor for his signature, he vetoed it.
With the realization that this type of pension reform was not an option with our governor, the House came up with yet another reform option. This reform would have reduced the pension benefit for new hires plus cap that benefit. To supplement the defined benefit for compensation over $50,000, the employee would be provided a 401(k)-style benefit. Sadly, even that proposal fell short of the votes needed to pass it at the end of last session.
While I still believe the very first option – mirrored in the original House Bill 922 – is the only option that can make a major dent in the pension problem, I supported all three proposals to get the ball moving... The longer pension reform is delayed, the weaker our pension system becomes and the larger the problem grows for Pennsylvania taxpayers.
The House is now poised to try yet again to put in place a 401(k)-style plan. This time we are attempting to pass legislation, Senate Bill 1, which has the agreement of the governor and the Republican and Democrat caucuses of both the House and the Senate.
This legislation would create a new plan for new state employees that are hired on or after Jan. 1, 2018 for SERS and July 1, 2018 for education system employees. These three options would be available to the new employees:
- A side-by-side defined benefit/defined contribution hybrid plan with a 1 percent accrual rate
- A side-by-side defined benefit/defined contribution hybrid plan with a 1.25 percent accrual rate (this will be the default plan if no election is made by the employee)
- A defined contribution-only option
These changes are expected to save $3 billion.
While some critics say that this does not do enough to fix the problem, I say that any first step is a step in the right direction. The time is now. We can no longer put this off and hope that our children or their grandchildren will find a way to fix it.