PENNSYLVANIA PUBLIC SCHOOL RETIREMENT PLAN EXPLAINED

In conversations with members of the public it is obvious most people don't know or understand how the Pennsylvania teachers retirement plan works.

I hope to lay out the basics of this plan in a clear and simple way. I will also, at a later time look at the other public pension plans in the state, as well as the pensions of elected officials and judges.

The teachers pension system was enacted in 1917,  and was left mostly unchanged until the 1970's.

In the next three decades retirement eligibility age was lowered, the multiplier was increased, and other expansions added.

The system came under stress after the 2008 recession when income from investments dropped, and value of investments declined. It has recovered some, but is now underfunded by $35.1 billion .

It is now approaching crisis level, with annual contribution of school districts set at 21.4% for 2014-2015, and expected to go to 25.84 in 2015-2016. That was before the recent decline in the stock market. The state is supposed to reimburse 50% of employer contributions to the school district.

Retirees are in 4 groups.

TC- hired before 1983, 2.5 multiplier, full retirement after 35 years of service. or at age 60 over 30 years of service. early retirement loses 3% per year of full value max. 15% . pays 6.25% contribution. Vested after 5 years.

TD- hired after 1983, same as above but personal contribution is 7.5% of salary.

TE- hired after 2011, 2 multiplier, 7.5% to 9% contribution, depending on performance of fund. full retirement at 65, or 35 years of service and 57 years of service. any combination to equal 92. Vested after 10 years.

TF- hired after 2011, 2.5 multiplier, 10.3% to 12.3% contribution, depending on performance of fund.
other details same as TE.

All These values are to be reevaluated every 5 years.

Examples of  benefits for Northwestern Lehigh Teachers.

TC or TD class,  78,000 x.025 x 30 yrs service =  $58,500 annual benefit
                                                  x 35 yrs             =  $68,250.
                                                  x 40 yrs             =  $78,000.

These benefits could be more, if the teacher has extra pay for activities etc., some have stipends in excesses of $10,000 per year.

Administration and principles are also included in this plan. They earn between $100,000 and $140,000 annually; the benefits would act accordingly.

With the 401 type plan that most people have, their retirement benefit is dependent on the performance of the investments.

With this defined plan by the state, any shortfalls in investment return is guaranteed to be made up by the taxpayers through the real-estate tax.

Since this plan was introduced and administrated by the state, this pension plan should be removed
from the school budget and funded by the state. This would relieve some of the burden on property owners and spread it out among all its citizens.