- Associated Press - Tuesday, June 3, 2014

Editorials from around Pennsylvania:

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‘HYBRID’ PENSION REFORM IDEA IS WORTH PURSUING

As a new report makes clear, the pension proposal from Rep. Mike Tobash (R-Schuylkill/Berks) would be a promising step toward much-needed long-term reform. The Public Employees Retirement Commission, an independent advisory group to state pension funds, found Tobash’s plan would save roughly $11 billion over the next 30 years.

However, his plan is only part of the wider changes needed to protect both taxpayers and public workers from the drastic underfunding of state pension systems.

Tobash suggests a new hybrid that combines a smaller guaranteed traditional pension with the more flexible, but less secure 401k-style retirement savings plans.

Because his plan applies only to new hires, most of the benefit comes in the latter years covered by the analysis. There’s no immediate relief for school districts and state agencies that face painful, steady increases in pension contributions.

A $40-billion-plus problem that took more than a decade to build up won’t be fixed in a single stroke.

The hybrid plan would also do little to immediately improve today’s shaky condition of the state’s two big pension funds. They are more than $40 billion short of what’s needed today to ensure that all future benefits promised to current workers are covered.

But going forward, Tobash’s plan does offer something for both taxpayers and workers. The hybrid he proposes combines the advantages of both traditional pensions and 401k plans.

A baseline retirement benefit would be guaranteed via a traditional pension. (But it’s a modest guarantee, based on the first $50,000 of an employee’s salary, with that cap going up by 1 percent each year for inflation.)

That smaller guaranteed retirement benefit would be supplemented by a 401k-type plan. For this portion, taxpayers need only contribute a fixed amount of money - period, end of story. They would not have to guarantee a certain total retirement benefit and make up huge funding shortfalls. A worker’s eventual retirement benefits would depend on how well the investments in the 401k perform.

Workers keep their 401k retirement money even if they move to a new job. That’s a big advantage in a world where it’s more and more common to switch jobs multiple times during a career.

The bigger challenge for legislators and Gov. Corbett is dealing with the state’s obligations to current workers and retirees, not new hires. Somehow, the two big, underfunded retirement systems have to be shored up at a price that’s realistic for school districts, state budgets and taxpayers.

That’s tough to do, because the state is barred by law from unilaterally cutting pension benefits that current employees or retirees were promised.

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