Scarnati Announces Senate Passage of Historic Pension Reform



(HARRISBURG) – The State Senate today approved a historic pension reform bill that will transform public employee retirement benefits for the 21st Century and limit future financial risks for taxpayers, according to Senator Joe Scarnati (R-25).

Scarnati, who was instrumental in passage of Senate Bill 1, explained that the bill passed the Senate by a bipartisan vote of 40-9.  The bill is projected to save more than $5 billion and shield taxpayers from $20 billion or more in additional liabilities if state investments fail to meet projections. In addition, the bill creates a new Pension Management and Asset Investment Review Commission to study ways to reduce investment costs with the goal of saving an additional $3 billion.

“Today we have made historic changes to Pennsylvania’s pension systems,” Scarnati said.  “Senate Bill 1 provides excellent structural reform and many outside experts have been quick to proclaim that this bill goes directly to the head of its class in the nation.” 

Scarnati highlighted the fact that pension benefits already earned by current employees and retirees will not be affected by this legislation.  The bill offers all new public-sector employees one of three different retirement planning options – a defined contribution plan similar to the 401(k) system offered by most employers in the private sector, or one of two hybrid plans that combine a 401(k)-style system with the defined benefit system that state employees and school employees have.  While the new system would only apply to new hires, current employees and all current members of the Legislature could voluntarily opt into the new system if they so choose upon the plans’ start dates.

“The pension crisis is the leading cause of property tax increases in our school districts and the biggest cost driver causing our budgetary issues in the state,” Scarnati stated.  “Pension reform is not an easy issue to tackle.  Changes must be made, but we also must acknowledge current retirees and the investments of current state employees.  Senate Bill 1 will help to ensure the stability of our Commonwealth for decades to come.”   

The new options would provide greater flexibility for employees who do not spend their entire career in public service while still providing good retirement security for career workers. Most employees who leave service with 20 years or less of service time would see a better benefit under the new system than they would have earned under the current system due to the portability of the 401(k)-style plan.

“Legislating is about finding compromise.  Today’s Senate Bill 1 does just that.  It finds compromise while still ensuring fundamental structural reform going forward.  SB 1 has been sent to the House and is expected to receive swift consideration,” Scarnati concluded. 

CONTACT: Kate Eckhart 717-787-7084