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Pennsylvania Gov. Tom Wolf has proposed a new pension system for future state and public school employees as a means to end the state’s current budget impasse, said Jeffrey Sheridan, spokesman for the governor’s office.
The proposed plan includes a mandatory, 401(k)-style plan for all new employees making at least $75,000 annual income. In addition, all employees could be given the option to participate only in a defined contribution plan at their time of hire. The plan also features a risk-sharing component for all new employees. Mr. Wolf anticipates this proposed plan would reduce Wall Street management fees within the state’s two largest retirement systems by a combined $200 million annually. The total savings to the state are an estimated $20.2 billion. Further details were not immediately available.
The $51.7 billion Pennsylvania Public School Employees’ Retirement System and $27.6 billion Pennsylvania State Employees’ Retirement System, both based in Harrisburg, together have an unfunded liability of $60.1 billion.
In July, Gov. Wolf vetoed a pension reform bill that would have enrolled all new state and public school employees in a mandatory defined contribution plan, as well as offering an optional cash balance plan.
Mr. Wolf said in a news release at the time that the legislation he originally vetoed “provides no immediate cost savings to taxpayers and does not maximize long-term savings for taxpayers.”
He added the bill also didn’t address “the over $700 million in fees paid annually to Wall Street firms” to manage the state’s investments.
The governor’s office is continuing negotiations with state congressional Republicans to reach an agreement on a final budget.
James Comtois writes for Pensions & Investments, a sister publication of Business Insurance.
(Reuters) — An Illinois House committee Tuesday approved a bill that would give the cash-strapped Chicago Public Schools an extra 40 days to make a $634 million payment to its pension fund.