State Retiree Benefits Fact Sheet – Pennsylvania

  • December 18, 2007
Pennsylvania is one of several states that fell behind in funding its pension plans in the last several years—a recent trend that could cause trouble if it persists. The state's pension funding level was among the highest in the country in 2000, but dropped more dramatically than most states between 2000 and 2006; factors included a declining stock market, increased benefits and decreased government contributions. While the state's pension funding level is still higher than the 50-state average, the situation bears watching. On an aggregate basis, Pennsylvania contributed only 46% of the required amount in 2005 and 35% in 2006. On the non-pension side, the state was one of just 13 with any assets set aside as of 2006 for retiree health benefit obligations, and it is working aggressively to lower that long-term bill. As reflected in an October 2007 valuation, the Commonwealth has worked to reduce its $13.8 billion liability for these benefits to $9.4 billion. New labor agreements require retirees to contribute 1% of final salary for health costs, escalating to 3 percent by 2011.