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Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20170&cosponId=23916
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House of Representatives
Session of 2017 - 2018 Regular Session

MEMORANDUM

Posted: May 15, 2017 03:50 PM
From: Representative Jason Ortitay
To: All House members
Subject: Defined Contribution Plan for Future State Employees
 
In recent years a wide range of approaches to public employee pension benefit reform have been explored. During the current session alone, we have seen a variety of hybrid plan proposals and defined contribution proposals, as well as a bill that includes a cash balance plan. They have been the subject of a great deal of research, consideration and debate.

As I have considered the pros and cons of each approach and the valuable information I have obtained on the topic during this session, I have decided to take a somewhat different approach to tackling this important public policy issue. You will recall that the pension benefit reform bills we have debated in recent months apply to both the State Employees’ Retirement System (SERS) and the Public Employees’ Retirement System (PSERS). While my proposal will follow the lead of a number of colleagues who have introduced defined contribution (DC) plan proposals for future employees, given the substantial challenge that we face getting such legislation across the finish line, I believe that we should try to tackle one retirement system at a time.

That is why I will soon be re-introducing a bill to establish a DC plan for future state employees only. The bill proposes to place new state employees who begin service on or after January 1, 2019 into a DC plan with the following features:
  • A “footprint rule,” under which a current SERS member who returns to state service after a break will remain in the SERS DB plan for future service.
  • Employee/employer contribution rates:
    • Employee Rate – 7%
    • Employer Rate – 5.5% for hazardous duty employees
    • Employer Rate All Other Employees – 5%
  • An opt-out window for all current SERS members who wish to end their active membership in SERS during the period January 1 through April 20, 2019.
I believe that the DC approach is a vital first step toward lifting pension risk off of the shoulders of taxpayers and I encourage you to cosponsor this important piece of legislation.