Bad for teachers, too: Better pension options
If $63 billion in unfunded public pension liabilities aren't reasons enough for Pennsylvania lawmakers to pass pension-reform legislation, a peer-reviewed journal offers a different but equally compelling case to correct the state's course.
The Education Next article projects that nearly two-thirds of Pennsylvania teachers — who need 10 years' service for vesting — will never collect full pension benefits under the existing defined-benefit system. And needing 25 years' service for their pension benefits to exceed their contributions (plus rate of return on that money), fewer than three in 10 will break even.
That perversely incentivizes less effective teachers to remain in classrooms and more effective teachers to leave after 25 to 30 years, when their pensions' value stops growing.
Thus, the pension status quo, already bad for taxpayers, is also “a bad deal for teachers,” according to the Commonwealth Foundation, which maintains that this revenue sinkhole is “crowding out other state programs” and is “the number one driver of school property taxes, and of teacher layoffs.”
It's time to pass Senate Bill 1, which would give new public employees better options for themselves and for taxpayers — “hybrid” plans combining aspects of traditional defined-benefit and 401(k)-style defined-contribution plans, as well as an entirely 401(k)-style plan.
As Commonwealth says, the longer pension reform takes, “the greater the taxpayer-funded debt and the longer employees are trapped in restrictive retirement plans.”