The Public Employees Retirement Commission (PERC) recently issued an actuarial note on Rep. Grell’s (R-Cumberland County) pension reform legislation that would place new members of the State Employees’ Retirement System (SERS) and the Public School Employees’ Retirement System (PSERS) in a “cash balance” retirement plan beginning in 2015. A cash balance plan is defined as a type of traditional defined benefit plan with a defined contribution portability component. Cash balance plans shift some of the risk of a defined benefit plan from the employer (in this case—state government and school districts) to the employees who receive benefits.
Under this legislation, employees would be given cash balance savings accounts to which employees and employers would make contributions and to which interest would be applied. Also, this legislation proposes a $9 billion pension obligation bond to reduce some of the approximately $50 billion of unfunded liability in SERS and PSERS. The state legislature may consider public pension reform legislation in the fall.