The Sun-Gazette’s recent editorial on public workers’ pensions correctly points out that a recently reported $140 million surplus in state reimbursements for Pennsylvania’s school district pension costs should be used to “ensure that benefits earned by all those in the system are maintained which is morally correct.” I agree that the Commonwealth should honor its promise to the teachers, nurses, social workers, and law enforcement officials who never stopped paying into their retirement system. Many of us contribute 7.5 percent of our salaries for our pensions; some now pay 10.3 percent.
But forcing new employees into a 401(k)-type defined contribution plan will do nothing to reduce the Commonwealth’s pension debt, and will in fact increase employer (taxpayer) costs. Three states that have closed off their defined benefit plans and put all new hires in 401(k)-type plans: West Virginia (1991), Michigan for its state employees (1997), and Alaska (2006), all experienced dramatically higher employer (taxpayer) costs.
Actuarial studies in 12 other states examining a similar move concluded modifying defined benefit pension plans to lower long-term costs and increase employee contributions-both of which Pennsylvania did in the Pension Reform Act of 2010 is more cost-efficient. The governor’s proposal will do more harm than good. The employer cost for workers’ benefits under Act 120 of 2010 is only 2.2 percent going forward. Once the debt is paid, the system is very sustainable.
East Lycoming School District
President, East Lycoming Education Association