A new bill to help the funding of Pennsylvania’s municipal pension plans has emerged from the state Senate Finance Committee, according to a news release from the committee.
The bill creates three categories for municipal retirement plans, depending on the size of the plan’s unfunded liability, and a special category for the $3.5 billion Philadelphia Public Employees Retirement System, which covers Philadelphia’s municipal employees.
Under the bill, PPERS would freeze pension benefits for current employees and submit a proposal for covering new hires by Sept. 10, 2010, whose cost could not be more than 75% of the cost of the existing pension plan. The bill also allows the PPERS to defer up to $155 million in pension funding in 2010 and up to $80 million in 2011.
The three other categories are based on the size of the system’s unfunded mandate. Municipal retirement plans with funding levels of 70%-89% would see a reduction in contribution limits for two years, and those municipalities unable to make contributions would be encouraged to impose a special municipal tax.
Plans that are 50%-69% funded would see a contribution reduction for four years and would be required to develop an administrative improvement plan. These plans also would be restricted from increasing pension benefits until funding is improved.
Plans below 50% funded would have to enter a municipal pension recovery program administered by the $1.3 billion Pennsylvania Municipal Retirement Board, Harrisburg, which oversees more than 900 municipal retirement plans across the state. They also would have to provide for a traditional defined benefit plan and a defined contribution plan that requires employees to match employer contributions at 6%.
The bill needs approval from the full Senate before it can go to a conference committee to work out the details between the Senate and House versions of the bill, after which it can go to Gov. Ed Rendell for his signature.
“Currently, state statutes provide a complex formula for determining the health of municipal plans,” state Senate Finance Committee Chairman Sen. Pat Browne said in the news release. “This formula is cumbersome and extremely difficult to apply. This bill simplifies the process by establishing clear definitions of three levels of distress and the relief available based on the severity of the municipality’s unfunded liability.”