PA to Move Teachers, State Workers to Hybrid Pension Plans

Pennsylvania would be the first to transition all public school teachers and state employee pension funds to hybrid pension plans.

After two years, Pennsylvania lawmakers are moving ahead to address pension liabilities by moving state and pubic school employees from guaranteed benefit, taxpayer-funded pension plans to hybrid pension plans, according to The Morning Call.

In hybrid pension plans, roughly half of a pensioner's assets would be funded with individual 401(k) plans.

This is the largest risk transfer in a public pension system of our size in the nation’s history,” said Pennsylvania State Senator Pat Browne, chairman of the state's Senate Appropriations Committee.
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The state is hoping to reduce taxpayer exposure by more than 50 percent, although one of three long-term actuarial estimates indicate the hybrid pension plans might end up costing Pennsylvania taxpayers more in long-term debt costs.

Pennsylvania has $76 billion in unfunded liabilities for its State Employee Retirement and Public School Employee Retirement systems. A pension plan whose assets are less than its liabilities is considered underfunded.

According to the public pension resource, state and local employees comprise 13.8 percent of the U.S. workforce. "About 25 percent of public sector workers are covered by a public pension in lieu of Social Security, including nearly half of all teachers and over two-thirds of its firefighters and public safety officers."

According to, the Pennsylvania Municipal Retirement System, with its $1,994.5 million in assets and 13,475 participants, is funded at 100.7 percent as of 2015. Although, Philadelphia's $4.5 billion pension fund (as of 2015) is also underfunded at 45 percent. Underfunded municipal pension liabilities are a widespread problem for cities like Dallas verging on pension-led bankruptcy.

Municipal pensions would not be subject to a law moving Pennsylvania's state employees and public school teachers to hybrid pension plans. The legislation is expected to also pass in the state's house of representatives.

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