State pension pressure: The move to 401(k)-style will come in steps

Defined-benefit pension plans are long gone at most private-sector employers, yet Pennsylvania lawmakers and Gov. Tom Wolf want to retain some form of them for future state employees and public schoolteachers. If a scaled-down version of an old-style benefit is needed to sign pension reform into law, so be it. Some progress beats none at all.

The House last week passed a bill that would implement a hybrid defined benefit and 401(k)-style plan for future commonwealth employees and schoolteachers. The Senate passed legislation for a hybrid plan in December. It is unclear whether the chambers can reconcile their versions, which differ partly on how the defined benefit portion would operate. Mr. Wolf supports the House version, providing a defined benefit for the first $50,000 in salary and a 401(k)-style plan for additional income.

No one is suggesting that defined benefits be taken away from retirees or scaled back for those currently on state and school district payrolls. But they should be dropped entirely from the benefits packages of new employees. Private-sector employees are being forced to get by with 401(k) plans, so public workers should make do with the equivalent. It makes little sense for taxpayers to give state workers and teachers benefits more generous than they get from their own employers.

Jeff Sheridan, Mr. Wolf’s spokesman, insists that some type of defined benefit plan is necessary if the commonwealth is to continue attracting quality employees, some of whom could earn higher salaries in the private sector. That is a specious argument. Mr. Sheridan is more accurate in stressing that some element of a defined-benefit plan is needed to rally the bipartisan support necessary to push pension reform through an often-gridlocked Legislature. Steve Miskin, spokesman for House Republicans, says moving quickly toward a straight 401(k)-style plan also could increase pension management costs to an extent lawmakers find untenable.

Pension obligations are crippling Pennsylvania’s taxpayers and school districts, and even limited pension reform is sorely needed. It’s heartening that lawmakers have been making process on this and other issues following the months-long standoff over this year’s budget. For now, we’ll take as much pension reform as we can get.