HARRISBURG — Reform of Pennsylvania’s public pensions systems has been a focus in the Legislature over the past decade after the Great Recession exposed risks and caused “unfunded liabilities” to mount for state government and municipalities and school boards statewide.

On Jan. 1, a key component of Act 5 of 2017 became effective: new state employees can select either one of two side-by-side hybrid defined benefit (DB)/defined contribution (DC) retirement plans or a stand-alone DC plan.

These developments are, of course, a priority for Terrill “Terri” Sanchez, the Coal Township native who heads the State Employees’ Retirement System (SERS), which represents a combined 239,000 retirees and current state employees and assets of more than $29 billion.

She has testified before the Public Pension Management and Asset Investment Review Commission as recently as October, where among her messages was that payment of the amount required to fund promised benefits should be guaranteed through a state constitutional amendment.

Sanchez further discussed pension reform in an interview with The News-Item, where she focused on unfunded liability.

The employer contribution rate for retirement benefits for fiscal year 2017-18 for Pennsylvania agencies was 33.24 percent of payroll. The normal cost is 4.91 percent, but the remaining 28.33 percent is for unfunded liability.

“That’s awfully high, but there’s a long history behind that,” Sanchez said.

It began in 2001 when there were significant surpluses in the retirement fund and unfunded retroactive benefit increases were enacted. This was followed by a downturn in the markets following 9/11. From then on, it was a matter of the state having only so much money to pay its bills and, in 2005, the state’s contributions to the fund were “statutorily suppressed,” Sanchez said, and the result was more than a decade of underfunding.

“Thankfully, and responsibly, the state has paid its fair share for what is now the third year in a row. We want to preserve that good and help ensure it continues in the future,” she said.

Sanchez has pushed for reforms that wouldn’t risk the ability to pay retirees. Members pay their share, and SERS accounts for volatility in the stock market. The third piece of that puzzle is the state paying its share.

“It’s an obligation,” she said.

Note: There are 1,652 state retirees with addresses in Northumberland County. There is nearly an exact number of current employees, 1,651, who reside in the county. In 2017, the current workers contributed $5.9 million to their SERS accounts.

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