State House Sound Bites

Capitol reporter Katie Meyer covers Pennsylvania politics and issues at the Pennsylvania state capitol.

Would Wolf's retirement incentive add to the pension liability?

Written by Katie Meyer, Capitol Bureau Chief | Feb 24, 2017 7:27 PM
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Governor Tom Wolf wants to urge state workers to retire early. (Photo by AP)

(Harrisburg) -- Part of Governor Tom Wolf's plan to deal with a multi-billion-dollar structural deficit is to shrink the state's employee complement by urging workers to retire early. 

But lawmakers--particularly Republicans--have repeatedly brought up concerns that this would just add unnecessary millions to the state's more than $60 billion in unfunded pension debts. 

Wolf's incentive would allow employees who've worked close to 30 years to retire without penalty. He says that could save between $15 and $16 million per year.

That's a rough estimate--the plan would still have to go through the legislature. 

The incentive would only impact employees that get their pensions through the State Employees' Retirement Fund--or SERS--so it wouldn't include teachers or police officers, for example. 

SERS Executive Director David Durbin said he's recieved few specifics on the plan from the state. But he said previous plans offer some idea of what could happen. 

"We know in the past the pension system has had an increase in the liability that they've had to pay as a result of early retirement incentive programs," he said in a recent budget hearing before the House. 

Pamela Hile, a spokeswoman for SERS, clarified further: historically, she said, "early retirement incentives save employers money from a payroll perspective, but increase their post-employment costs." 

The last time the state proposed a retirement incentive program was 2003. It didn't pass, but actuarial analysis SERS did at the time showed it would've added between $600 and $800 million to the unfunded pension liability. That shakes out to somewhere between $97 million and $137 million in annual employer contributions.

A spokesman for the governor said that plan would've been more expensive than the current proposal, because it provided an additional bonus for retirees. 

He added, Wolf's plan makes fiscal sense because the state has to pay these employees' pensions at some point anyway--and this helps reduce the state's complement at the same time. 

"You're enabling people who have put 30 years of service in to retire, and then in some cases it will also enable the commonwealth not to refill that position, which saves money year after year," Abbott said.

A spokeswoman for Senate Republicans said the caucus takes issue with the governor adding to the pension debt without first looking for a way to reduce it. 

Would Wolf's retirement incentive add to the pension liability?

 

(Harrisburg) -- Part of Governor Tom Wolf's plan to deal with a multi-billion-dollar structural deficit is to shrink the state's employee complement by urging workers to retire early.

But lawmakers--particularly Republicans--have repeatedly brought up concerns that this would just add unnecessary millions to the state's more than $60 billion in unfunded pension debts.

Wolf's incentive would allow employees who've worked close to 30 years to retire without penalty. He says that could save between $15 and $16 million per year.

That's a rough estimate--the plan would still have to go through the legislature.

The incentive would only impact employees that get their pensions through the State Employees' Retirement Fund--or SERS--so it wouldn't include teachers or police officers, for example.

SERS Executive Director David Durbin said he's recieved few specifics on the plan from the state. But he said previous plans offer some idea of what could happen.

"We know in the past the pension system has had an increase in the liability that they've had to pay as a result of early retirement incentive programs," he said in a recent budget hearing before the House.

Pamela Hile, a spokeswoman for SERS, clarified further: historically, she said, "early retirement incentives save employers money from a payroll perspective, but increase their post-employment costs."

The last time the state proposed a retirement incentive program was 2003. It didn't pass, but actuarial analysis SERS did at the time showed it would've added between $600 and $800 million to the unfunded pension liability. That shakes out to somewhere between $97 million and $137 million in annual employer contributions.

A spokesman for the governor said that plan would've been more expensive than the current proposal, because it provided an additional bonus for retirees.

He added, Wolf's plan makes fiscal sense because the state has to pay these employees' pensions at some point anyway--and this helps reduce the state's complement at the same time.

"You're enabling people who have put 30 years of service in to retire, and then in some cases it will also enable the commonwealth not to refill that position, which saves money year after year," Abbott said.

A spokeswoman for Senate Republicans said the caucus takes issue with the governor adding to the pension debt without first looking for a way to reduce it. 

Published in News, State House Sound Bites

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