Are public pensions a thing of the past for young workers?

New teachers and state workers will no longer get a traditional pension in Pennsylvania.Governor Tom Wolf signed a bill Monday, making it the ninth state to replace the pension with a “hybrid” retirement plan. It goes into effect in 2019.

Governor Tom Wolf signed a bill Monday, making it the ninth state to replace the pension with a “hybrid” retirement plan. It goes into effect in 2019.
The new plan combines elements of a traditional pension and a 401(k)-style account.Overall, new workers will contribute more of their salary, work longer, and likely receive a smaller payout in retirement than under the current system, according to a report from the state’s Independent Fiscal Office.

Overall, new workers will contribute more of their salary, work longer, and likely receive a smaller payout in retirement than under the current system, according to a report from the state’s Independent Fiscal Office.
Powered by SmartAsset.comBut Pennsylvania’s pension system is currently one of the most underfunded in the country and is in need of reform. The bill had bipartisan support.

But Pennsylvania’s pension system is currently one of the most underfunded in the country and is in need of reform. The bill had bipartisan support.
“It’s a win for Pennsylvania taxpayers and fair to Pennsylvania’s workforce,” said Governor Wolf at a press conference Monday.

The reform will build upon previous legislation to help fully fund the pension system and preserve a path to retirement for public workers, said Greg Mennis, a director at Pew Charitable Trusts.
“Our research indicates that this would be one of the most — if not the most — comprehensive and impactful reforms any state has implemented,” he wrote in a letter urging state lawmakers to pass the bill.

Over the past 10 years, Rhode Island, Virginia, Tennessee and Georgia have created plans similar to Pennsylvania’s. They require workers to contribute some of their salary to a pension-like plan that guarantees a certain payout based on their salary. Workers also contribute to a 401(k)-style plan that they can take with them if they leave public service. The state will make contributions to both plans on their behalf.