Pension Reform Update

by Buchanan Ingersoll & Rooney PC

As June 30 approaches, the likelihood of an on-time balanced budget remains a question. And while there are many factors contributing to the commonwealth’s grim fiscal situation, there has been a lot of talk as of late about “pension reform.” Gov. Corbett has stated that he will end his streak of on-time budgets in order to find a solution to Pennsylvania’s pension problems.  But how did we get into this pension plight in the first place? A little background may be in order.

Pennsylvania has two state-administered pension systems: the State Employees Retirement System (SERS) and the Public School Employees’ Retirement System (PSERS). Commonwealth employees and public school teachers who participate in the respective pension systems contribute a portion of their salary to their pension system; employers are also supposed to make a contribution on behalf of each employee. At the time of their inception, the pension systems were designed to be predictable, if nothing else.

However, a series of events over the last decade or so has left the pension systems with a rather large unfunded liability, meaning that they do not currently have enough money on hand to pay out the retirement benefits that current employees are due. The downturn in the investment markets from 2000 to 2002 is one such factor, as is the global economic crisis of 2008. Additionally, members’ benefits were increased in 2001, and cost-of-living adjustments were made in 2002. At the same time, investments made by the pension systems were realizing such great returns that the commonwealth chose to take a “pension holiday” with legislation assuming that returns on investments would be enough to cover what the state’s regular contribution.

The most recent round of legislative attention on the issue of pension reform was in 2010. That year, the General Assembly enacted the Pension Reform Act in an attempt to curb rising pension costs. Reforms included increasing the retirement age, reducing benefits for new employees and extending the vesting period. The good intentions, however, weren’t enough to ward off what this year has become the pension’s most significant deficit yet –$47 billion dollars.

In conjunction with this year’s annual state budget, Gov. Corbett has stated made it clear that he doesn’t intend to sign a state budget until the pension crisis is addressed.  But how? There are several possible fixes being floated, with Rep. Mike Tobah’s (R-Schuylkill) “hybrid” pension proposal receiving the most media attention right now. The highlight of the proposal is that new state employees would be required to enter into a system similar to a 401(k). This process would begin once an individual has worked for 25 years or reached $50,000 in salary. According to the Public Employees Retirement Commission, Tobash’s plan would save taxpayers nearly $11 billion over the next 30 years. Opponents of the Tobash Plan are mainly concerned with the lack of immediate effect on Pennsylvania’s current economic situation.

Rep. Glen Grell (R-Cumberland) has also put forth a proposal with three main components: the use of bonds to pay down the pension debt, moving new employees into a cash balance plan and lowering pension benefits. Another proposal by the Senate Democrats relies mainly on a bond issue to pay down the pension debt.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Buchanan Ingersoll & Rooney PC | Attorney Advertising

Written by:

Buchanan Ingersoll & Rooney PC

Buchanan Ingersoll & Rooney PC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.