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Pennsylvania Lawmaker Will Reintroduce Plan to Replace Pension System With Mandatory 401(k) Plan for All New Public Employees

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Pennsylvania State Rep. Warren Kampf says he will be reintroducing a bill that would significantly alter the states pension system.

The bill would create two new, mandatory defined-contribution plans: one for state employees and one for school district employees.

All future state hires would be funneled into these 401(k)-style plans. In other words, the bill would block off the current defined-benefit pension system to all new hires.

The bill is designed to reduce the state’s future pension debt. On the flip side, a 401(k) is a less reliable source of retirement income because the payout isn’t guaranteed and depends largely on investment returns.

More from Pennsylvania Business Daily:

Included in Kampf’s legislation would be a 4 percent employer match and a mandatory employee contribution.

“These are the types of retirement plans the vast majority of our constituents have in their own lives,” Kampf said. “These are plans that businesses across our country use in their budgets to avoid financial obligations that cannot be planned. We are simply asking public employees to follow the same plans used by those in the private sector as a way to stop the growing havoc public pension systems have created for taxpayers all across the country.”

“We must act now,” Kampf said. “Our public pension crisis only deepens as the days go by.”

If the bill were to pass the state’s legislative chambers, it likely wouldn’t get past the desk of new Governor Tom Wolf.

Wolf has said he opposed big changes to the state’s pension system and wants to give previous reforms time to take effect.

 

Photo by TaxCredits.net via Flickr CC License

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