Benninghoff Considers Pension Reform Bill A Good First Step

Rep. Kerry Benninghoff (R-Centre/Mifflin) on Monday voted in favor of a public pension system reform bill that will save taxpayers money.  The bill now heads to the governor’s desk so that he can sign it into law.


“This bill is a good first step toward public pension reform,” Benninghoff said.  “Like all legislation, it’s based on compromise.  It is not perfect, but it is much better than the status quo.”


The bill will save taxpayers money in two ways.  First, it will avoid a huge pension system contribution rate spike in the short term by essentially refinancing pension costs over an extended period of time.  Second, the bill will reduce long-term costs by reducing pension benefits and increasing contribution rates from workers hired after the bill takes effect.


The bill will affect the two major public pension systems, the Public School Employees’ Retirement System (PSERS) and the State Employees’ Retirement System (SERS).


Without the reforms, state government and school districts – and the taxpayers who fund them – would face a double-digit spike in contribution rates for the two public pension systems.  Those costs would be shouldered by school property and state income taxpayers.


“This is as much a taxpayer protection bill as it is a pension reform bill,” Benninghoff said.  “Taxpayers simply can’t afford to pay more and more for public pensions while their own retirement plans are standing still or, even worse, losing ground.”


The reform bill includes an innovative “shared risk” provision to help protect taxpayers.  Currently, state and local taxpayers shoulder the entire burden of risk associated with pension fund investments.  If those investments underperform – as they did during the recession – taxpayers must make up the difference.  The shared risk provision would require new hires to shoulder part of the burden of underperforming investments through a higher contribution rate when investment returns fall below a certain level.


The bill also combats rising pension system costs by essentially rolling back the benefit enhancements provided in 2001.  New hires will receive lower benefits while contributing more to the pension system.  Specifically, the reform bill would:


  • Reduce the benefit multiplier rate – which is used to calculate pension benefits – from 2.5 percent to 2 percent for new employees and from 3 percent to 2 percent for new lawmakers. 
  • Increase pension contribution rates from any new state workers, teachers, school administrators and other public pension system participants.
  • Increase the vesting period – the amount of time an employee must contribute to their pension before qualifying for guaranteed benefits – from five to 10 years for new hires.
  • Increase the retirement age from 60 to 65 for new state employees and from 62 to 65 for new school employees.

All of the reforms will apply to workers hired after the bill takes effect, which for lawmakers will be as early as Dec. 1.


“This is a meaningful victory in the ongoing battle to reform Pennsylvania’s public pension systems,” Benninghoff said.  “I think we still can and should do more to bring public pensions in line with what’s available in the private sector.”


Rep. Kerry Benninghoff
171st District
Pennsylvania House of Representatives
(814) 355-1300
(717) 783-1918

Contact:  Dan Massing

House Public Relations

(717) 772-9845

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