Pension Reform

Taxpayer contributions to Pennsylvania state and school employee’s retirement plans are expected to escalate dramatically beginning in 2011-12. Retiree healthcare will also place enormous burdens on future taxpayers. Specific actions to be considered should include:

• Identify and implement a benefits cost strategy which is predictable and affordable within a responsible fiscal budget for the Commonwealth. There should be no budget exemptions or any other special considerations for state pension or GASB No. 45 costs. If these costs are deemed unaffordable, then significant plan design changes must take place.
• Obtain private-sector input and improve the oversight of these programs.
• Amend Act 9 of 2001 and Act 38 of 2002 to provide benefits which are affordable.
• Create less reliance on defined-benefit plans for retiree income. Adopt defined-contribution plans with an employer match as a replacement (in part or in whole) to the defined-benefit plans.
• Benchmark from the private sector businesses drawing from the same labor pool. Consider benchmarking design and cost sharing to an “index of benefits” provided from a representative set of major private-sector companies based in Pennsylvania. Benchmarking only to other public plans, while perhaps an interesting academic exercise, is an attempt to ignore the realities of today’s world.
• Increase employee cost-sharing for active healthcare plans.
• Reduce coverage, adopt tighter age and service eligibility requirements, and implement premium caps for the retiree healthcare plans.
• Curtail any future pension cost of living increases for retirees. Consider how much of an “increase” a retiree receives each year through their healthcare plan.
• Address the question of whether elected officials should participate in any state retiree healthcare or state pension plan.