House Co-Sponsorship Memoranda

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House of Representatives
Session of 2017 - 2018 Regular Session

MEMORANDUM

Posted:	March 27, 2017 04:15 PM
From:	Representative Mike Tobash
To:	All House members
Subject:	Pension Plan Design Legislation

The Pension Reform Conversation Drones On! While many call doing the same thing and expecting a different result insanity, I often hear stories from our colleagues that their efforts to make legislative change takes years and multiple sessions. So here we go again! I have submitted 2 bills and I am asking you to co-sponsor one or both of them. Both bills ONLY affect the retirement plans of FUTURE State and School District employees of Pennsylvania. The first bill has more fiscally conservative and aggressive elements to manage our ever growing pension crisis. Both bills are structured as the stacked Hybrid concept that has been introduced and gotten considerable support over the last 5 years. Here is why this approach is superior and should become law: Shifts Risk Effectively- The stacked approach shifts risk by continuing to shrink the current guaranteed benefit pension plan, while introducing a mandatory 401k style plan for all FUTURE state and school district employees with the exception of PA State Police and higher ed. (state police are the only employees that do not receive social security benefits and higher ed. employees already have a 401k style plan) Develops Savings – The savings have been calculated to be from approximately $10 - $15 Billion over the 30 year experience period. That exceeds almost every other plan that has been offered according to the actuarial studies that have been performed. Thoughtfully Delivers Benefits - Future employees and taxpayers will benefit by having the guaranteed portion only on lower salary limits, while allowing flexibility at higher limits, thereby allowing greater potential growth, portability and transferability that is an important element of financial planning for a modern workforce. Critics have said there are no immediate savings to this type of reform, but important points need to be made: When current employees keep their existing plan, savings take time. The longer we wait to enact reform, the longer it will take to realize savings. (This plan develops around 80 million dollars of savings in the fourth year.) Thank You, Mike Tobash

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Document #1

Description:

Tobash Stacked Hybrid with 3% Inflation Escalator– This stacked hybrid plan is identical to the proposal that passed the House last June by a substantial, bipartisan margin.  The plan allows future state and school employees to earn a defined benefit during the first 25 years of service, on the first $50,000 of income (indexed at a rate of increase of 3% per year to establish the defined benefit compensation limit).  Also, under the plan, the employee will earn a defined contribution (DC) benefit throughout his or her career, with the bulk of the DC earnings occurring after 25 years of service and on income over the defined benefit compensation limit.  Full retirement age under this plan is age 65 or a combination of years of service and age equaling 92, so long as the employee has 35 years of service.

Document #2

Description:

Tobash Stacked Hybrid with 1% Inflation Escalator –This stacked hybrid plan is very similar, but not identical, to the proposal that passed the House last June by a substantial bipartisan margin.  The plan allows future state and school employees to earn a defined benefit during the first 25 years of service, on the first $50,000 of income (indexed at a rate of increase of 1% per year to establish the defined benefit compensation limit).  Also, under the plan, the employee will earn a defined contribution (DC) benefit throughout his or her career, with the bulk of the DC earnings occurring after 25 years of service and on income over the defined benefit compensation limit. Full retirement age under this plan is 65.