Pension Primer #2: Paying More For Less
Cost of New Employee Pensions Will Rise with Defined Contribution Plan, Undoing 2010 Savings for Taxpayers
Keystone Pension Primers: As Pennsylvania policymakers, media, and citizens evaluate Governor Tom Corbett’s pension proposal unveiled February 5, 2013, the Keystone Research Center will release a series of short “pension primers” to demystify the often complex details at the heart of the pension debate. This is the second installment in that series.
Governor Tom Corbett’s plan to establish 401(k)-type retirement accounts for future state and school employees would increase the taxpayer cost of pensions for new employees by a third—1% of payroll. As more new employees are hired each year, the portion of payroll subject to this increase would grow, adding an estimated $5 million in costs each year until the annual cost eventually reaches $179 million per year, $112 million of which would be paid by school districts and get passed onto local property taxpayers.