Pennsylvania could save nearly $10 billion in public pension costs by improving transparency and reducing Wall Street fees, according to recommendations by the state's Public Pension Management and Asset Investment Review Commission.
"In the U.S., employers on average pay about 3% of their payroll toward the retirement benefits of their employees," state Rep. Mike Tobash and commission chairman said in a livestreamed news conference. "Pennsylvania right now finds itself setting aside more than 30% of our payroll to catch up on mistakes of the past."
After a seven-month review of the $57 billion Pennsylvania Public School Employees' Retirement System and $29.8 billion Pennsylvania State Employees' Retirement System and three informal public hearings, the commission recommended the state maintain full payment of the annual actuarially determined contribution amount. It also advised that Pennsylvania establish a central investment office and enact legislation mandating annual stress testing.
In addition, the commission recommended increasing transparency of investment costs, performance and benchmarks, and enacting legislation mandating increased public reporting of all investment expenses. Finally, the commission advised moving to fully index all public market investments in both public equities and fixed income and adopting risk-reducing measures.
"With these common-sense reforms, we can save nearly $10 billion over the next 30 years," Gov. Tom Wolf said at the news conference.
The state General Assembly has been paying close attention to the commission's work, Mr. Tobash said.
Meanwhile, state Treasurer and commission vice chairman Joe Torsella noted that "the majority" of the recommendations, such as the move to indexing, "could happen on their own" without legislation.
The commission was established in 2017 to review the investment management practices of PennPSERS and PennSERS, both based in Harrisburg.