News Release: Pa. to Enact Nation’s Most Significant Pension Reform

In an overwhelming, bipartisan vote, the state House today voted 143-53 to approve transformative pension reform legislation hailed as a part of a “major turn-around among states” by the Pew Charitable Trusts. The bill now heads to Gov. Wolf, who has indicated he will sign it.

SB 1, sponsored by Senate Majority Leader Jake Corman, begins to transition Pennsylvania away from the current, unsustainable traditional pension system to a system that provides portability for workers and predictability for taxpayers.

“This is a turning point for Pennsylvania,” commented Nathan Benefield, vice president and COO for the Commonwealth Foundation. “Ten years ago, many denied a pension crisis existed, and just two years ago, Gov. Wolf vetoed pension reform. But grassroots momentum for reform has been growing.  Today, we saw the first results of this momentum, with lawmakers making reform a priority and Governor Wolf pivoting from staunch opposition to vocal support.”

SB 1 will enroll new state employees and school teachers in a side-by-side hybrid plan consisting of a defined benefit component and a 401(k)-style component. New employees could also choose to enroll solely in the 401(k)-style plan, and current employees could choose to opt in to the new system. According to a report from the state’s Independent Fiscal Office, the enacted reform will reduce taxpayers’ pension risk by approximately two-thirds.

Pennsylvania’s unfunded pension liabilities skyrocketed from $7.6 billion in 2006 to $71 billion by market value in 2016. Though SB 1 does not address this debt, the Pew Charitable Trusts notes this reform will “mitigate more risk” than reforms passed in any other state.

“For years, government union leaders fought reform efforts tooth and nail,” Benefield continued. “As a result, their own members’ retirements have been put at risk, and taxpayers have suffered burdensome property tax hikes. Today’s reform illustrates real progress can be made in the face of powerful and entrenched opposition.

“While more work remains to fully address the pension problem, including tackling the debt, this reform is a major step toward ensuring that in 20 years, we won’t look back and say, ‘If only we had acted.’ We applaud lawmakers for passing this reform and look forward to Gov. Wolf signing it into law.”  

Additional details on the specific features of Pennsylvania’s reform can be found here, and see below for a brief timeline of Pennsylvania’s pension reform efforts.

Nathan Benefield and other Commonwealth Foundation experts are available for comment. Please contact Gina Diorio at 862-703-6670 or [email protected] to schedule an interview.

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