Pennsylvania Gov. Tom Wolf signed a state pension reform bill into law Monday that will change retirement benefits for most state employees and all school employees hired after Jan. 1, 2019.
At the signing, Mr. Wolf said that Senate Bill 1 “reduces Wall Street fees” and “shifts unnecessary risk away from the taxpayer.” He added that the new law “could save … over $10 billion to Pennsylvanian taxpayers.”
“Let's be clear: This plan addresses our liability in the only real and responsible way possible, by changing the structure of pension benefits,” said Mr. Wolf. “The fact is, we cannot accelerate the shrinking of our liability on the backs of our current employees, and this bill recognizes this in a real, concrete way.”
Senate Bill 1 moves new workers not in high-risk jobs such as state police and corrections officers into a hybrid retirement system, receiving half of their benefits from the current taxpayer-funded plan and half from a 401(a) defined contribution plan.
New employees hired after Jan. 1, 2019, can elect to solely participate in the 401(a) plan. Current employees also will have 90 days to choose to opt into the new hybrid plan in 2019.
The law will affect the $51.3 billion Pennsylvania Public School Employees' Retirement System and $26 billion Pennsylvania State Employees' Retirement System, bPennsylvania State Employees' Retirement System Pennsylvania State Employees' Retirement System, both based in Harrisburg.
The law is projected to save more than $5 billion and shield taxpayers from $20 billion or more in additional liabilities if state investments fail to meet projections, said a news release issued from the office of Republican Sen. Jake Corman, the bill's chief sponsor.
The Senate passed the bill on June 5. The House of Representatives passed it on June 8.