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Retirement Planning > Saving for Retirement

Pa. House panel OKs pension plan switch in 2015

By Peter Jackson

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HARRISBURG, Pa. (AP) — A House committee on Tuesday endorsed legislation to shift Pennsylvania’s major public pension systems to 401(k)-style plans for newly hired employees starting in 2015, a concept previously endorsed by a Senate panel, but the financial implications remained unclear.

An all-Republican majority on the State Government Committee voted to push the legislation to the House floor over the objections of Democrats who said it was unfair to state workers and school employees.

Republicans said the new system would put Pennsylvania’s public pensions on equal footing with the majority of private-sector employees and provide more certainty about the state’s pension costs.

It would place public employees “on a trajectory where politicians can’t screw it up any more,” said Rep. Matt Gabler, R-Clearfield. “They will be in control of their own accounts.”

Rep. Mark Cohen of Philadelphia, the panel’s ranking Democrat, said the legislation would reduce pensions for future employees and create pension disparities among employees doing similar jobs. He called it “a terrible step in the wrong direction.”

GOP Gov. Tom Corbett has proposed cutting the future benefits of more than 370,000 state employees and school employees by $12 billion over 30 years while phasing out the current conventional pension plans.

But his plan drew threats of a lawsuit by unions and opposition even among some leaders of the Legislature’s GOP majority. Now, less than a week before lawmakers are scheduled to begin their summer break, the House and Senate committees have embraced only the 401(k)-style change in pension plans for new hires and there are still differences to be ironed out.

For example, the Senate bill would preserve the existing defined-benefit plan for about 15,000 current and future state police officers and prison guards. The House legislation would require new hires in those positions to switch to the new plan but guarantee them more generous state contributions than other employees receive.

Neither committee provided estimates of the costs or savings that would result from switching pension plans, but lawmakers anticipated that a scheduled Tuesday meeting of the Public Employee Retirement Commission would bring some answers.

The Corbett administration projects long-term savings from the introduction of a mandatory defined-contribution plan, but unions claim that phasing in the new system while phasing out the current one could actually increase costs.

If a new pension system is approved, it would take effect July 1, 2015, for members of the Pennsylvania School Employees’ Retirement System and Jan. 1, 2015, for members of the State Employees’ Retirement System.

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