The Herald, Sharon, Pa.

Local News

February 7, 2013

Corbett's pension plan would save districts $138 million

HARRISBURG — Gov. Tom Corbett’s plan to reform the funding for the two main public sector pension systems would save local school districts $138 million in the 2013-14 school year.

Over the next five years, the savings provided by Corbett’s plan would amount to $1 billion to local school districts.

While the governor’s plan calls for changing the pension plan by putting new employees in a 401(k)-style plan and would make other changes to existing employees’ plans, the savings would come from lowering the amount the state and local school districts pay in the form of employer contributions.

Corbett’s plan reduces current annual employer contribution limits from the mandated 4.5 percent to 2.25 percent in 2013-14.

Over the next five years, through the employer contribution limit changes, the commonwealth will realize nearly $2 billion in savings.

The governor’s office has estimated that without the changes, the pension costs would consume 60 percent of all new revenues for 2013-14, roughly $500 million that could be spent elsewhere.

The governor also proposes changing the funding formula for State Employee Retirement System members beginning on Jan. 1, 2015, and Public School Employee Retirement System members on July 1, 2015.

The governor and Republican lawmakers argue that the state has the right to adjust the formula for funding the pension system moving forward. All benefits earned by employees up until the new formula kicks in will remain unchanged.

Benefits for existing retirees also are unchanged.

The key changes proposed for existing employees would be: reducing multipliers used to calculate pension benefits; setting a ceiling of 110 percent of the average salary of the last four years of an employee’s career; capping the amount of pensionable income at $113,700; and determining retirement benefits by averaging the last five years of work. Some of those reforms are intended to limit excesses associated with employees who run up large amounts of overtime in their final years of work to boost their pensions, said Sen. John Gordner, R-27th of Lycoming County.

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