The Governor signed legislation yesterday into Act 5, which affects the pension benefits for future state (SERS) and public school (PSERS) employees in 2019.  The effective date for state employees is January 1 and school employees July 1.

The legislative fiscal notes (here and here) and the actuarial note on the legislation provide most of the basis of information in this blog.  Suffice it to say the Act creates three options for state and school employees hired in 2019; two are hybrid plans with aspects of defined benefit and defined contribution options, and one is a pure defined contribution plan.  The two hybrid plans would create two new classes within SERS and PSERS on top of the classes that exist currently (see SERS handbook and PSERS handbook).  Several classes of public safety employees would be exempt from having to enter one of the new plans; the first hybrid plan would be the default plan for those not making a choice on which plan to enter.

Beyond that, there are multiple differences in the three plans as to how SERS and PSERS employees would be treated on how much they contribute and how much the employer contributes.  Current SERS and PSERS members would have periods to opt-in if they like after the plans go into effect.

The cumulative savings of the changes is estimated at $1.396 billion over a 30 year period ($319 million present value) and lower the unfunded liabilities of the plans by $4.2 billion on a cash flow basis and $1.4 billion on a present value basis.