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Jersey Shore, PA 17740
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Hon. Garth Everett
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Harrisburg PA 17120-2084
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Everett says Legislation Makes Improvements in Public Pension Systems

Significant reforms in the two Pennsylvania public pension systems will be achieved following passage of House Bill 2497, provided Gov. Ed Rendell signs it into law, said Rep. Garth Everett (R-Lycoming) today. 

“We have been facing a critical time in the life of both the Pennsylvania School Employees Retirement System (PSERS) and the State Employees Retirement System (SERS) where reform was badly needed to avert a major crisis down the road,” said Everett. “This legislation does not do everything I was hoping it would, but it does make a large step in an overall effort to cut costs in the pension systems and thus, bring about savings for the taxpayers and school boards in our Commonwealth. If we had done nothing, government and school districts would have had to raise contributions to the pension systems at massive rates as soon as 2012. Obviously, those costs would have to have been absorbed by school boards and taxpayers.” 

The legislation includes nine reform points that will apply to newly hired state employees, including lawmakers and school employees with the changes going into effect for newly-elected lawmakers after Dec. 1, 2010, state employees hired after Jan. 1, 2011, and school employees hired after July 1, 2011. They are: 

  • Rolling back the benefit enhancement of 2001 and reducing the benefit multiplier from 2.5 percent to 2 percent for employees and from 3 percent to 2 percent for lawmakers while maintaining employee contribution rates of 6.25 percent for members of SERS and 7.5 percent for members of PSERS.  Thus, new employees will get a lower benefit while paying a higher contribution rate.
  • Increasing the vesting period from five years to 10 years.
  • Increasing the retirement age from 60 to 65 for state employees and from 62 to 65 for school employees.
  • Eliminating the lump sum option that currently permits retiring employees to withdrawal all of their contributions at the end of their career, while receiving a monthly benefit for the remainder of their life.
  • Prohibiting the use of pension obligation bonds to prop up or mask the funded status of either plan.
  • Capping the retirement benefit under the new plan at the member’s pre-retirement salary, regardless of how many years of service.
  • Reducing the “fresh start” amortization of the plan’s liabilities from 30 years to 24 years.
  • Requiring any future “purchase of service” to be priced so that they are actuarially neutral.
  • Creating a “shared risk” provision, which the employer or the taxpayer would no longer be solely responsible for investment losses in the future.  The contribution rate for employees would be adjusted periodically to reflect any poor investment performance by the fund.  If the fund does not achieve its assumed rate of return of 8 percent, employees would be required to increase their level of payroll contributions to the fund. 

Everett said much of the debate over the legislation was distorted, and clouded the overall picture, which disturbed him. 

“I was dismayed that there was a lot of incendiary rhetoric thrown at this issue from different interests, especially in the use of the words ‘union bailout,’ which could not be farther from the truth.” said Everett. “The truth of the matter is, the funds are not struggling because of anything the members did or did not do. It is clear that the House and Senate in years past kept state and school district employer contributions way too low, while enhancing benefits. That is the heart of the problem. Unions have no control over PSERS and SERS.” 

The bill has been sent to Rendell for his consideration. 

Rep. Garth D. Everett
84th District
Pennsylvania House of Representatives

(570) 546-2084
(717) 787-5270
Contact:  Raymond Smith
(717) 705-1834
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