The Pennsylvania legislature has passed Senate Bill 1, a measure that seeks to ease the state’s unfunded liability by providing new state employees, including teachers, hired after Jan. 1, 2019 with a choice of one of three retirement benefits. Gov. Tom Wolf (D) is expected to sign the bill into law.
The House of Representatives on June 8 passed the measure in a 143-53 vote. The House State Government Committee on June 5 voted 18-8 to report the bill to the House.
The Senate passed the bill on June 5 by a 40-9 margin. The Senate Appropriations Committee on June 4 marked up and approved the bill in an 18-8 vote, mostly along party lines. It was previously approved by the Senate Finance Committee on May 23.
The three retirement benefits from which new state employees hired after Jan. 1, 2019 could choose if the bill becomes law are:
1. a side-by-side hybrid DB/DC plan, where, among other provisions, for teachers, the split is 5.5% of compensation to the DB and 2.75% to the DC (this is the default option if the employee makes no choice);
2. a side-by-side hybrid DB/DC plan, where, among other provisions, for teachers the split is 4.5% of compensation to the DB and 3.0% to the DC; or
3. a standalone DC-only plan, where teachers would contribute 7.5% of compensation, employers would contribute 2%, and additional voluntary contributions would be allowed.
Provider selection for local 403(b) plans would remain at the discretion of school districts. The only selection requirements for local 403(b) or 457 plan providers outlined in the bill would be the ability to provide to school districts the information referenced by section 8411.1 of the bill and not also being a provider to the state DC plan.
The actuarial notes on the bill are available here, and the fiscal notes are available here.
Ray Harmon is government affairs counsel to the American Retirement Association.
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