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Tuesday, 21st September 2010

Better Benefits: Reforming Teacher Pensions for a Changing Work Force

Better Benefits: Reforming Teacher Pensions for a Changing Work Force
Source: Education Sector

In 2002, Pennsylvania legislators thought the state's pension plan was sitting pretty. Feeling flush from the stock market boom of the 1990s, actuaries told the Legislature the fund had $7 billion more than it would need to cover financial obligations to current and future teacher retirees. In response, the Legislature contributed only a tiny fraction of what it had been giving, while simultaneously increasing teacher retirement benefits.

The combination of low contribution rates and enhanced benefits has been haunting Pennsylvania ever since. By early 2010, its $7 billion surplus had vanished, replaced by a $10 billion deficit. The state's head actuary is now projecting that to meet future obligations, state and district contributions will have to increase nearly eight-fold between 2010 and 2014. Pennsylvania's case, unfortunately, is not unusual.

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