Plan by State Representatives Mike Tobash (R Schuylkill/Berks) Mike Tobash (R ‐ Schuylkill/Berks) Warren Kampf (Chester/Montgomery)
An Overview of the Problem Pennsylvania faces a nearly $50 billion pension debt that will take decades to overcome. This massive debt was caused by: Underfunding. U d f di Declines in the markets. Increases in benefits Increases in benefits.
Why Continuing with the Status Why Continuing with the Status Quo is Unacceptable p Proactively working to protect current employee benefits and to eliminate the possibility they will be in jeopardy in the future. 60 000 jobs could be at risk 60,000 jobs could be at risk. Increase in employer contributions from $3.4 billion to $6.6 billi billion. The state’s bond rating is in jeopardy of being lowered The state s bond rating is in jeopardy of being lowered again.
Best Solution Adopt a pension reform plan that seeks to reduce the costs and shift the risk for both the SERS and PSERS pension systems from taxpayers pension systems from taxpayers. Rep Tobash is sponsoring an amendment to Rep Rep. Tobash is sponsoring an amendment to Rep. Kampf’s House Bill 1353 to achieve this.
How Would Savings Be l Achieved? Achieved? New employees entering the state systems would be enrolled in a combination of 401(k) type and traditional ( ) pension (hybrid) plan.
Hybrid Pension Plan Highlights Addresses STEP ONE of meaningful pension reform by STOPPING THE BLEEDING from within the current system current system. Over a 30 year projection period this plan is estimated Over a 30 ‐ year projection period, this plan is estimated to save between $11 billion and $15 billion.
Plan Details Defined Benefit (DB) Defined Contribution (DC) Defined Contribution (DC) Defined Benefit (DB) 2 percent accrual rate. Employee contribution of 1 percent and Employee contribution of 6 percent. employer contribution of 0.5 percent on all compensation up to $50,000. compensation up to $50,000. Lifetime final average salary, not to exceed Lifetime final average salary, not to exceed $50,000 (indexed 1 percent annually). Employee contribution of 7 percent and employer contribution of 4 percent on all DB is fully earned after 25 years of service. compensation more than $50,001. Participants are vested after 10 years of Employee contributions vest immediately service. and three ‐ year vesting of employer and three year vesting of employer DB DB payments cannot be collected prior to t t b ll t d i t contributions. age 65 without penalty. No loans or in ‐ service distributions from DB payments cannot be collected prior to the DC plan. age 60 without penalty for those not Portability, withdrawal penalties, etc., per covered by Social Security. IRS rules. IRS rules N diff No different classes of service. The only l f i Th l Additional DC employer contribution of 6 distinction between members and levels of percent for those employees not covered by benefits is if the position is covered by Social Security. Social Security.
This plan is proactively designed to protect the benefits This plan is proactively designed to protect the benefits • • current employees have earned. Those who take a leave of absence will not lose their benefits. • All new employees would be treated the same under the new All new employees would be treated the same under the new • • plan. No one person is responsible for creating this plan. •
P Protecting Current Employee i C E l Benefits Benefits Simply put, benefits of current employees will NOT change as a result of this plan.
Leave of Absence Rules regarding maternity or sick leave, vacation, authorized leave of absence without pay, disability, changing positions or districts will NOT cause a break changing positions or districts will NOT cause a break in service or require employees to start a new plan. The ONLY way a current employee’s plan would not continue as is, would be if he or she quits, or the q employment is terminated.
Equal Treatment Under the new plan, all new employees entering the system would be treated the same. Teachers, legislators, judges, clerks, etc., will all be in the same plan receiving the same benefits the same plan, receiving the same benefits.
Collaborative Plan This plan has been developed through testimony held b by many stakeholders after hearings with the Public k h ld f h i i h h P bli Employees Retirement Commission in 2012. This is not the work of any one person, agency, or entity. entity.
Contact Information Rep. Tobash Rep. Kampf Email: MTobash@PAHouseGOP.com Email: WKampf@PAHouseGOP.com Capitol Office Capitol Office Capitol Office Capitol Office 4B East Wing 422 Irvis Building PO Box 202125 PO Box 202157 Harrisburg, PA 17120 ‐ 2125 Harrisburg, PA 17120 ‐ 2125 Phone: 717 ‐ 260 ‐ 6148 Phone: 717 ‐ 260 ‐ 6166 District Office District Office 988 East Main Street 42 East Lancaster Avenue, Unit A Suite A Paoli, PA 19301 Schuylkill Haven PA 17972 Schuylkill Haven, PA 17972 Phone: 610 ‐ 251 ‐ 2876 Phone: 610 ‐ 251 ‐ 2876 Phone: 570 ‐ 385 ‐ 8235
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