Op-ed: Setting the Record Straight on Pension Reform

A recent study of retirement systems across the country found that Pennsylvania’s public employee pension systems are among the most underfunded in the nation. Increasing pension fund contributions by the state and local school districts are devouring precious resources that would be better spent educating young people, and pension fund costs are also one of the primary culprits behind property tax increases that have strained household budgets throughout Lancaster County over the past decade.

The pension crisis offers lawmakers two options: we can tackle the problem now and make structural changes to pension systems to control future costs, or we can pretend the problem doesn’t exist and stick taxpayers with a gargantuan bill they cannot afford to pay. I recently joined my colleagues in pursuing the more responsible of these two options – passing legislation to provide a sweeping overhaul of public employee pension systems.

Senate Bill 1 makes a number of beneficial changes: protects the benefits already earned by retirees and current employees, strengthens the pension systems by decreasing our unfunded liability, and protects taxpayers by moving future employees to a pension plan that is more in line with what is offered in the private sector.

To be clear, Senate Bill 1 does not reduce or make any changes to benefits already earned or paid into the systems by current state or school employees, nor does it impact current retirees. For current employees hired prior to the 2010 pension reform law, the bill offers a choice to either accept a lesser benefit going forward or receive the same benefit coupled with an increase in their contribution rate. In the end, the employee would dictate which option best fits their retirement plans. In either case, benefits already earned by employees would not be affected.

Future employees would be placed into 401(k)-style defined-contribution plan and an accompanying cash-balance plan, providing a sustainable pension for employees while reducing the risk placed on taxpayers when pension funds do not perform as well as expected.

Opponents of pension reform have made wild accusations about the plan, with some going so far as to falsely claim the legislation would doom future retirees to a life of poverty. This misguided idea ignores the fact that retirement benefits offered in Senate Bill 1 would mirror the level of benefits currently enjoyed by millions of today’s retirees. In reality, retirees would still have access to Social Security benefits, personal savings and a reliable pension. To suggest that retired school teachers and state employees would be suddenly stricken with poverty upon retirement is disingenuous at best, and deliberately misleading at worst.

Contrary to some despicably deceptive rhetoric from the Wolf Administration, the plan also does not give any sort of special consideration to lawmakers. While current state employees would be given the option to increase their contribution rate in order to continue receiving the current level of benefits, lawmakers will not have that option.

Upon reelection, legislators would be placed into the same 401k-style/cash balance retirement plan as new employees. It was extremely disappointing to hear the governor argue that the new pension system would be unfair to new employees while simultaneously claiming that same plan is too lavish for lawmakers. Governor Wolf is entitled to his opinion that the plan is either too generous or too thrifty, but it can’t be both.

It is extremely important for all stakeholders to recognize the seriousness of the problem and work toward meaningful solutions. We cannot bury our heads in the sand and hope the problem solves itself, and we certainly cannot expect state taxpayers to continue to shoulder a disproportionate share of the costs for retirement benefits for a select few employees.

Senate Bill 1 offers a roadmap toward a public employee pension system that preserves all benefits that have already been earned, provides benefits to future employees that are similar to options available in the private sector, and exposes taxpayers to fewer financial risks. I am hopeful that as this debate moves forward, we can have an honest discussion on the issue, free from the half-truths and outright falsehoods spread so far by opponents of reform.

CONTACT: Stephanie Buchanan (717) 787-4420


Back to Top