Legislation that would create a new defined contribution plan and close Pennsylvania's two defined benefit pension plans was approved by the state Senate Finance Committee on Wednesday.
The bill, introduced by Senate Finance Committee Chairman Mike Brubaker, would close the defined benefit plans of the $50.5 billion Pennsylvania Public School Employees' Retirement System and the $25.7 billion Pennsylvania State Employees' Retirement System, both of Harrisburg, on Dec. 31, 2014.
State employees hired on or after Jan. 1, 2015, would instead participate in a newly created defined contribution plan.
The bill was originally introduced on May 15 and would have affected current employees. Mr. Brubaker removed the parts of the bill affecting current employees as a compromise to get the bill through the finance committee, which approved the revised bill by a 6-5 vote.
“The fact remains that our commonwealth has an unfunded pension liability totaling $47 billion which needs to be honored with a plan to pay for it. With this debt expected to grow to $65 billion within a decade, combined with rising property taxes, I remain baffled that anyone would choose to ignore this problem,” Mr. Brubaker said in a news release. “My amended legislation takes another step toward reforming our pension system and leaves us with a working product to consider now or in the future.”
The public school retirement system had a funding ratio of 69.1% as of June 30, 2012, and the state employees' system had a funding ratio of 65.3% as of Dec. 31, 2011, according to the their most recent annual reports.
The bill now moves to the Senate Appropriations Committee. The Senate adjourns after the end of the state's fiscal year on June 30.