A Pension System for All?

The Governor’s report on public sector pensions-which we blogged about earlier in the week-has set a lot of discussion in motion. So too have the testimonies collected by the Public Employment Retirement Commission, which was mentioned in an editorial this morning by the head of the Township Supervisors Association. Some of the presenters mentioned consolidating plans, which the Association head disagrees with, noting correctly that many of the state’s biggest plans-SERS, PSERS, Philadelphia, and Pittsburgh-have significant problems and that a solution should not "make the healthy swallow the same bad medicine as those in trouble".

We agree: in fact, in testimony we presented in 2008 to a hearing of two state Senate committees, we noted "There seems to be little interest at the state level to consolidating plans based on past discussions. It has been mentioned before, but nothing has come to pass. The problem with such an approach is that municipalities with well-funded pensions will view a merger or consolidation as a bailout of the lower-performing plans. In addition, the nationwide experience shows that it is almost non-existent for a state to assume total control and responsibility for local pension plans."

But perhaps there is another way to think about consolidation in the future which does not involve lumping the good plans in with the bad if the state were to think about the employees of the state (SERS), the employees in education (PSERS), local police, firefighters, clerks (covered by one of the 3,000 local plans administered locally or through the PA Municipal Retirement System), county employees, authority employees, etc., etc., in which enrollment in those plans is closed as of a certain future date and all new employees of the Commonwealth, its local governments, its authorities, agencies, school districts, community colleges, state universities, are enrolled in one new statewide plan with a clear employer and employee contribution mix. The existing plans would stay in place until there are no more participants in them and then the state would fully transition to the new unified plan. It would obviously take a very long time (and extends the further such a change is put off) but might be worth exploring.