Pennsylvania Budget Deal Likely to Feature Pension Overhaul


On the central tenets of Pennsylvania Gov. Tom Wolf’s campaign was keeping pension benefits the way they are – no cuts, no adjustments.

But a months-long budget stalemate with his state’s Republican majority has forced Wolf to change his stance.

Now, it’s likely any forthcoming budget deal will contain significant changes to the state’s pension system: including a switch to a hybrid plan for future state hires.

More on the pension proposal currently in the works, from PennLive:

The pension reform department of the final state budget talks is aimed toward producing a new benefit plan for future state and public school employees that’s come to be known as a “side-by-side hybrid.”

That’s side-by-side, as in it’s really two distinct pension plans working for the employee from their first day on the job: one part a traditional defined benefit with payouts based on annual salary and years of service; the other a 401(k)-style plan more dependent on the worker’s contributions in and investment choices.


One source familiar with proposals being traded this fall said the finished plan still has the potential to meet standard income replacement goals for career public-sector employees.

With Social Security benefits factored in, that source said, a retiree could expect to get to about 85 percent of his or her retirement-year gross income, a figure that would decline gradually from there since Pennsylvania’s state pension systems don’t give cost-of-living adjustments.

Over the course of retirement, the revised plan plus Social Security should average over 70 percent in replacement income. That would be a benefit cut of about 10 percent from current levels available to new hires, the analyst said.

Pennsylvania Republicans have been pushing for two years to shift more risk from the state to the individual worker. But until now, the proposals have gone nowhere.


Photo by Governor Tom Wolf via Flickr CC License

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