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Rep: Pension reform bills prevent tax on businesses

By , - Last modified: June 12, 2012 at 12:03 PM

Bills introduced this morning to move state pensions toward market-driven 401(k) plans could prevent future tax burdens on businesses, said Rep. Warren Kampf, who sponsored the legislation.

The twin bills would address the estimated $30 billion in underfunding of pension plans for state employees and school district employees, said Kampf, a Republican representing parts of Chester and Montgomery counties.

“We’re at a very tight spot and our taxpayers are feeling it at every level,” he said.

House Bill 2453 makes the changes for state employees. House Bill 2454 would address school district employees. The state Senate also is addressing the pension issue with Senate Bill 1540. The bills do not yet show up on the Legislature’s website.

By reducing the state’s expenditures on pensions, it would be able to direct more tax dollars to other parts of the budget without increases, he said.

The bills would most immediately address the expansion of pension plans by requiring all new state and school employees to be enrolled in defined contribution plans, such as 401(k) plans, that shift more burden of paying for it onto the employee. The state’s contribution to the new plans would be set at a 4 percent match, Kampf said.

Existing employees would then be incentivized to freeze their pension and move to the new plan with the lure of a 7 percent state match and the ability to manage the account’s investment options, he said.

“We still have existing obligations and we have to fund that,” Kampf said, “but adding new employees to that system is just repeating the mistakes of the past.”


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