Pension Reform Presentation

8/14/2019 Pension Reform Presentation

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PSERS

Rep. Glen Grell87th Legislat ive District Cumberland County


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Pennsylvanias def ined benefit

pension plans (PSERS and SERS)

and municipal pension plans are

experiencing f inancial

dif f icult ies, w hich is threateningtheir future sustainability.


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Low employer contribut ion rate.

From 2000 t o 2009, em ployers paid 3%t o 4%.

Rat e w as 0 percent in one year .

Em ployees cont r ibu t e bet w een 6% and

7.5%. Act 40 of 2003 masked the problem.

Actuarial sm oo t hing .


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Substant ial unavoidable increases in

employer contribut ions.

PSERS most recent valuat ion 79%funded.

(79 cent s for every do llar ow ed)


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In the 2010-11 f iscal year, employercontribut ions w ill increase f rom 4.78%

to 8.22% of payroll. In the next few years, the increasecould jump to nearly 30 percent and

remain at that level for many years. Called a spike really a p lat eau.


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4.788.22

10.59

29.2232.09

33.6

0

5

10

15

20

25

30

35

40

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Projected Employer Cont ribut ions (in %)


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Increase funding for the system JustPay More

Increase schoo l dist rict cont r ibut ions

Increase t he st at es cont ribut ion

Increase invest m ent ret urns (im provedm arket condit ions)

Increase em ployee cont ribu t ions Inject one-t im e fund (federal st im ulusdollars)

Pension Obligat ion Bonds (POB)


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Reduction of Liabilit ies

Art icle 1, Sect ion 17 of t he PA

Const it ut ion proh ibit s chang ing plan forcurrent m em bers.

Change p lan f eat ures for new h ires

Reduce t he m ult ipl ier f rom t he cur rent 2.5percent.


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Deferral of Liabilit ies Alter actuarial m ethods and fo rm ulas

Im pose rat e sp ike collars

Suggest ed by Gov. Rendell in 2008.

Com parable t o elect ric rat e caps

Legislat ion never int ro du ced

Rendell 2010

Fresh St ar t

Phase In


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Not m uch int erest in t he GeneralAssem bly or fr om t he Governor t o t alkabout t h is issue.

House Republican Task Force w ouldanalyze and invest igat e reasonable andf iscally sound so lut ions.

Convene public hear ings w it heducat ors, school adm inist rat ors, schoolboard m em bers and t axpayers.


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Honor exist ing ob ligat ions.

St op t he bleeding scale back for new

hires. Provide ret irem ent secur it y attractqualit y t eachers.

Require appropr iat e em ployercontr ibut ions.


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Prepay fu t ure enhancem ent s.

Use f inancial t echniques t o ease t hespike.


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House Bill 2135 pr oposes a long -t ermapproach and opens up d iscussions.

Com m it m ent t o no t af fect currentm embers and ret irees.

NEW HIRES ONLY creat e a hybr id p lan

t o com bine t he best feat ures of adef ined benefit plan and a def inedcont r ibut ion plan.


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Employees cont ribute 3% of salary

Employer cont ributes 2%

Funds w ould be invested among amenu of opt ions w ith PSERS

Accumulate balance paid out atret irement (or annuit ized)


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Will not renege on commitments toret irees and current employees NOcurrent teacher or ret iree w ould be

affected.

No band-aid approach.

Cannot cont inue to ignore the problem .


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House Bill 2135 provides a solut ion tolong-term situat ion.

Governors proposed fresh start ratecollars provide phase in.

Treasurer McCords ideas on POBs make

more sense.


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Early ret irement incent ives may bepossible if new hires begin at low er

salaries and at low er pension cost level. Smoothing and actuarial t inkering w illlessen the impact w ithout running up a

large bill.


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Questions?

[email protected]

www.RepGrell.com

w w w .legis.st at e.pa.us - House Bill 2135

Pension Reform Presentation

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Transcript of Pension Reform Presentation