A Republican lawmaker from Cumberland County has unveiled legislation to reform the pension systems for Pennsylvania teachers and state employees.
Rep. Glen Grell said Monday that he will introduce two bills; one to create a new retirement benefit tier for future employees and encourage elective changes to existing member plans, and a second measure to borrow $9 billion to address pension underfunding.
Grell said injecting the $9 billion into the State Employees Retirement System and the Public School Employees Retirement System would not be new debt, since Pennsylvania already owes $45 billion to the two systems.
By issuing bonds at the current low rates and shoring up the pension systems now, he said the systems' unfunded liability would be reduced by $15 billion over the next 30 years.
Current members would be offered an opt-in incentive of a lower employee contribution rate, which is presently 6.25 percent for SERS members and 7.5 percent for PSERS members.
In return, Grell said members would agree to modifications to the present "Option 4" lump sum withdrawal to make it actuarially neutral and change the final average salary calculation so that it encompasses the five highest salary years rather than the current three highest years.
New employees beginning service after June 30, 2015, would be enrolled in a cash balance plan.
Grell said that instead of relying on a formula that considers an employee's length of service and makes calculations based of the final years of employment like a traditional pension, cash balance plans rely on a guaranteed interest rate over the course of employment combined with fixed employee and employer contributions.