Pa. lawmakers explain their pension plan choice

• Jan Murphy/PennLive
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  I cover state government and basic and higher education policy. Reach me at JMurphy@pennlive.com or at 717-255-4106 or 717-255-4106.

For the first time this year, state lawmakers had a chance to move away from the traditional pension plan and pick a 401(k)-style plan like the one most private-sector businesses offer.

A pension reform law passed in 2017 gave the lawmakers elected before Jan. 1 of this year a window of time that expired at the end of March to decide whether they wanted to switch from the traditional plan into one of the three pension plan options:

• Move into a 401(k)-style plan.
• Choose one of two hybrid plans that combine a 401(k)-style plan with a traditional plan. The difference between the hybrid plans generally comes down to choosing between a contribution rate of 7.5 or 8.25 percent of their salary;  how their contribution is divided between the 401(k)-style plan and the traditional one; and the rate at which their pension would grow each year.
• Remain in the traditional plan that guarantees them a set retirement income.

We asked about two dozen lawmakers who cast votes on the pension reform legislation about their pension choice. We also spoke with a newer member who didn’t have a say in the pension reform legislation but declines pension benefits.  Here is what they said:

Rep. Patty Kim

How she voted: Kim, D-Harrisburg, voted for the pension reform bill.

Her pension choice: The 401(k)-style plan.

Why she chose that option: “I viewed the pension reform as the Legislature’s effort to make the state retirement system more sustainable and closer to what the average PA taxpayer has available to them. I supported that so I thought I should follow through and be a participant in that new system. I viewed the direct contribution option as both a sensible choice for where I am in my career as well as completely sustainable for the taxpayers.”

Senate Majority Leader Jake Corman

How he voted: Corman, R-Centre County, voted for the pension reform bill.

His pension choice: Remain in the traditional pension plan

Why he chose that option: “Under the law, legislators are treated just like every other state employee. Just like them, I sat down and looked at the three options,” he said.

Since he is “closer to the end of my career than the beginning, it did not make sense for me to start over with a new retirement plan. The vast majority of the other state employees in the same situation made the same decision.”

House Majority Leader Bryan Cutler

How he voted: Cutler, R-Lancaster County, voted for the pension reform bill.

His pension choice: The 401(k)-style plan

Why he chose that option: “It reflects my continued commitment to supporting good government initiatives.”

House Democratic Leader Frank Dermody

How he voted: Dermody, D-Allegheny County, voted for the pension reform bill.

His pension choice: Remained in the traditional pension plan

Why he chose that option: “It’s a good retirement plan. I contributed to it and the commonwealth has,” he said. “I stayed in the defined benefit plan. It’s an option I had.”

Senate President Pro Tempore Joe Scarnati

How he voted: Scarnati, R-Jefferson County, voted for the pension reform bill.

His pension choice: The 401(k)-style plan

Why he chose that option: He pointed out in 2001 when lawmakers had the option to enhance their pension by 50 percent whereas state employees could only enhance their’s by 25 percent, he chose to not take any increase at all.

“I’ve been in business all my life and I treated my decisions here like I would in my own business,” he said. “I feel responsible to the taxpayers and somewhat to my own belief.”

Senate Democratic Leader Jay Costa

How he voted: Costa, D-Allegheny County, voted for the pension reform law.

His pension choice: Remain in the traditional pension plan

Why he chose that option: “Senator Costa was comfortable with the plan that he had and preferred to stay with it,” said his spokeswoman Brittany Crampsie.

House Speaker Mike Turzai

How he voted: Turzai, R-Allegheny County, voted for the pension reform bill.

His pension choice: The 401(k)-style plan

Why he chose that option: “I advocated for it and I think it’s more like what the private sector has. When I was in the private sector, that’s what we had, a 401(k) plan. My wife is in a 401(k) plan. … That was the best choice for me.”

Rep. Sheryl Delozier

How she voted: Delozier, R-Cumberland County, voted for the pension reform bill.

Her pension choice: Remain in the traditional pension plan

Why she chose that option: “I am the same as any other state employee. Every state employee had the option of switching. Many of those from my district had no plans whatsoever of switching. When they started, they had a plan for their retirement and they were going to continue that. I did exactly what my constituents that are also state employees did and stayed in the same plan from when I started.”

Rep. Jared Solomon

How he voted: Solomon, D-Philadelphia, voted against the pension reform bill.

His pension choice: Remain in the traditional pension plan

Why he chose that option: “If I’m going to defend pension benefits, I need to defend them. I think they’re a good worth fighting for. If you work in a non-public sector environment, it’s that kind of guaranteed future income that is something you desire. So we should be striving to protect that in a sector of society who still think that’s a value that needs to be upheld.”

Rep. Cris Dush

How he voted: Dush, R-Jefferson County, voted for the pension reform bill.

His pension choice: The 401(k)-style plan

Why he chose that option: “The reason is that Article 2, Section 8 of the Pa. Constitution [a reference to legislators’ compensation] does not provide that I might receive something after my service as an on-going tax on the people.”

Sen. Mike Regan

How he voted: Regan, R-York County, voted for the pension reform bill (Act 5 of 2017).

His pension choice: Remain in the traditional pension plan

Why his chose that option: “Under Act 5 of 2017, legislators are treated just like all other state employees. In consultation with my wife and financial planner earlier this year, we reviewed the three options available to us. Because it is my intention to serve for a maximum of one more term, changing plans at this time would be symbolic only.

“No matter which plan was chosen, my adviser informed me that my participation would be non-impactful to the SERS system over that short period of time. My decision was to follow the guidance of my financial planner and the vast majority of state employees with similar circumstances.”

Rep. Daryl Metcalfe

How he voted: Metcalfe, R-Butler County, voted for the pension reform bill.

His pension choice: Remain in traditional pension plan

Why he chose that option: “I’ve been in the current system since Day One over 20 years ago so it didn’t make sense for me to change. For a younger member, it might make sense. But at the end of your tenure here, it doesn’t make sense to go into the new program but to stay in the current one.” He said he plans to serve only one to two more terms.

Rep. Seth Grove

How he voted: Grove, R-York County, voted for the pension reform bill.

His pension choice: The 401(k)-style plan

Why he chose that option: He offered 10 reasons:

1. “Currently, SERS is paying more in benefits than they are receiving in contributions and they are losing money in their investments. Why risk a potential bankruptcy?”

2. “I removed the golden handcuffs – staying until you reach your years of service” to be vested in the traditional plan.

3. “I am 39 and my next job will have a [defined contribution] pension. Might as well start one now.”

4. “It reduces taxpayers risks. The risk in a DC is completely shifted to the employee.”

5. “I was an advocate for the DC option. The governor wouldn’t sign a default DC plan, so the best we could do is an optional DC. Playing the long game, we now have a DC plan in statute which means we don’t have to argue about what a plan looks like. It’s just a matter of shutting off the current hybrids for new employees.”

6. “Politicians run public pension plans. To date, Pennsylvania has had a poor track record of pension fund management. I prefer managing my own money.”

7. “It’s the right thing to do.”

8. “I have always believed public service is about sacrifice. It’s not about me, it’s about the people I represent.”

9. “Pennsylvania still has corruption issues. Making this transition we can show we are beyond corruptible.”

10. “Harrisburg has a ‘greed’ reputation. Only way to get rid of it is show you aren’t greedy.”

Rep. Kerry Benninghoff

How he voted: Benninghoff, R-Centre County, voted for the pension reform bill.

His pension choice: Remain in the traditional pension plan

Why he chose that option: “For consistency. It’s the system I’ve been in.”

He pointed out in 2001 when lawmakers had the option to enhance their pension by 50 percent whereas state employees could only enhance their’s by 25 percent, he was one of only 18 lawmakers serving at that time who chose the lower percentage.

“This bill was designed for incoming new employees and everybody kinda knew that,” he said. “I’m not really a new incoming employee.”

Rep. Greg Rothman

How he (would have) voted: Rothman, R-Cumberland County, was attending a wedding in Ireland when the vote was taken. If he had been there to cast a vote, he said he would have been a “yes.”

His pension choice: Declines pension benefits

Why he chose not to take pension benefits: “The pension crisis remains one of the largest cost burdens to our schools and the commonwealth. New employees should go into a defined contribution [401(k)-style] plan like every, or nearly every, private business and even the federal government. The hybrid plan was a good first step but the unfunded liability is close to $80 billion and growing.”

Rep. Sue Helm

How she voted: Helm, R-Dauphin County, voted for the pension reform law.

Her pension choice: Remained in traditional pension plan

Why she chose that option: “I didn’t change mine because I’m going to run for election again – I’m not saying I’m not going to do that – but I think I put a lot more time in than what I plan to be there for in the future.”

Sen. Mario Scavello

How he voted: Scavello, R-Monroe County, voted for the pension reform bill.

His pension choice: Remain in the traditional pension plan

Why he chose that option: He said his preference was an earlier version of the pension reform legislation that would have put new hires and lawmakers upon election into a new pension plan and not have it be optional.

“That was what I voted for originally and I would have stayed with it,” he said. “If we pushed a bill to opt everybody in [the new plan], I’m on it. But if there are choices, that’s ridiculous. But that’s what they wanted.”

Rep. Russ Diamond

How he voted: Diamond, R-Lebanon County, voted for the pension reform bill.

His pension choice: He had declined pension benefits, choosing instead to set aside some of his own income in a deferred compensation plan that received no state matching contribution. Now he is in the process of opting into the 401(k)-style plan that is available.

Why he chose that option: “We’ve been saying all along public sector employees should be treated like private sector employees. Most private sector employees that have a company retirement plan, they have a company match. There’s very few companies that say the only thing you can do is defer some of your compensation like what the state was making us do.”

Senate Appropriations Committee Chairman Pat Browne

How he voted: Browne, R-Lehigh County, voted for the pension reform bill.

His pension choice: Remain in traditional pension plan

Why he chose that option: He considered the financial risk to the commonwealth as well as what benefited him personally as someone who has 24 years in the traditional pension plan.

“When you have someone who is more senior in their career, a state worker or school district worker, 25, 30 years, the risk they present is a lot less because they have less time to go because you are only talking about prospective payroll. You are not talking about the past. That’s already locked in.

“But their ability to replicate what they were getting before is also a lot less because you only have a short period of time to build earnings in your [401(k) style] plan. Defined contributions require time because you are building earnings in your account. They are not based on a final average salary.

“So the expectation on more senior people in our workforce – and that’s across the board – to make that choice is a lot less. It’s not the same for everybody. That’s part of the thought process people went through. As someone who is responsible for both [risk to the commonwealth as well as his own personal risk], that’s the thought process I went through.”

Rep. Frank Ryan

How he voted: Ryan, R-Lebanon County, voted for the pension reform bill.

His pension choice: Declines pension benefits. Instead he sets aside some of his own income in a deferred compensation plan that receives no state match.

Why he chose not to take pension benefits: “I believe the state is technically insolvent and I don’t want to add to that insolvency because the pension plan is a fairly rich pension plan. I’m concerned with the amount of unfunded liability and don’t want to add to it.”

Along with that, he shares Dush’s concern about the constitutionality of compensating lawmakers beyond a salary and mileage, as the constitution states. While the Supreme Court has ruled compensation beyond salary and mileage is constitutional, Ryan said he believes that was an incorrect decision.

“I read it differently and I feel I have a moral responsibility that if I believe not to partake in something, not to take it.”

Rep. Mike Sturla

How he voted: Sturla, D-Lancaster County, voted against the pension reform bill.

His pension choice: Remain in the traditional pension plan.

Why he chose that option: “It’s a stable plan. It means I won’t go bankrupt in my retirement. If I switched everything over to a 401(k) and we hit a recession again and I have all my money in the stock market and my pension tanks, I’m back looking for a job at age 85.

“Part of the reason I worked these years [as a lawmaker] at a lesser rate than I could have made in the private sector is at least I had a defined benefit plan and I wasn’t going to get skunked when I was 85 years old.”

Rep. Frank Farry

How he voted: Farry, R-Bucks County, voted against the pension reform bill.

His pension choice: Remain in the traditional pension plan

Why he chose that option: “It was a family decision,” said the new father.

Rep. Andrew Lewis

How he voted: Lewis, R-Dauphin County, was elected in November. He was not in the House when the pension bill was voted.

His pension choice: Declines pension benefits

Why he chose not to take a pension: Lewis said many people in his district don’t have a pension so “I didn’t feel I should get a special perk that everybody else doesn’t get.”

Further, he said he wants to work on “good constructive pension reform that protects pensions that are in place, especially our teachers’ pensions, but also make sure [the system remans] solvent for the next generation.” He said he wants to be able to work on that legislation without feeling conflicted about how it affects his own pension.

“Finally, I intend to be in the Legislature short term,” he said. “I wanted to get some good things done and I didn’t want this hanging over my head that ‘hey, if you do 10 years, now you get the pension.’ It’s like an incentive that makes you think about that versus what the best position is to have when it comes time to vote.”

Rep. Rob Kauffman

How he voted: Kauffman, R-Franklin County, voted for the pension reform bill.

His pension choice: Remain in the traditional pension plan

Why he chose that option: “I’m just not going on record on that one. I have way more big things to worry about,” he said, noting there’s a lot on the agenda of the House Judiciary Committee, which he chairs.

Kauffman said no one in his district asks about this. “It’s not a big deal,” he said.

Lawmakers who didn’t respond or declined to comment

Rep. Dawn Keefer, R-York County, (far left) voted for the pension reform bill and switched to the 401(k)-style plan. Messages left on her cell phone and with her district office were not returned.

Sen. Judy Schwank, D-Berks County, voted for the pension reform bill and remains in the traditional pension plan. Messages left for her on her cell phone and with a staffer were not returned.

Sen. Vince Hughes, D-Philadelphia, voted against the pension reform bill and remains in the traditional pension plan. He declined comment through a spokesman.

Search the database of pension votes and pension choices

In this searchable database using records obtained from the State Employees’ Retirement System and Senate and House websites, PennLive compiled a listing of lawmakers’ votes on the 2017 pension bill and their own pension choice.

PennLive and The Patriot-News are partners with PA Post.