This week’s state budget hearings in the Senate and in the House provided more reasons to continue defined benefit pension plans than reasons to switch to defined contribution plans and hybrid plans.
At both hearings, some legislators implied that the pension issue is merely a question of whether the Governor and the State Legislature want to switch to defined contributions and thus switch the risk from taxpayers to employees. Not only is this an oversimplification of a very complex issue but it ignores the fact that public employees also are taxpayers and that this decision will have significant consequences for our state’s economy.
State Senator Vincent Hughes (D, Phila.) noted that 90 percent of PSERS and SERS retirement benefits payments are in the Commonwealth and total over $7 billion – which helps the state and local economies. Representatives of PSERS and SERS testified that this is a trend which they expect will continue.
Testimony also established that switching to defined contributions or a hybrid plan would be costly; it would pose higher investment and longevity risks for employees; but, it would not ensure quicker payment of the unfunded liability.