Pennsylvania
Overview
Three state retirement systems in Pennsylvania account for most retirement plan assets and participants in the Commonwealth. These are the Pennsylvania Public Schools Retirement System (PSPRS); the Pennsylvania State Employees’ Retirement System (SERS); and the Pennsylvania Municipal Retirement System (PMRS). PSPRS administers retirement benefits for most certificated and non-certificated school employees. SERS membership includes employees of the Commonwealth. PMRS members are employed by political subdivisions that have elected to participate. Boards of each system manage their respective funds’ assets. The US Census counts more than 1,500 local retirement systems in Pennsylvania; the vast majority of these are relatively small plans; the largest of these local systems by far is the retirement system sponsored by the City of Philadelphia.
Plan Design
School employees hired since 7/1/19 and state employees hired since 1/1/19 must choose between two types of hybrid plan or a defined contribution plan. State employees hired between 1/1/11 and 12/31/18 and school employees hired between 7/1/11 and 6/30/19 participate in a traditional pension plan with variable employee contributions. PMRS participants and nearly all employees participating in local retirement systems also participate in a traditional DB plan.
According to the US Government Accountability Office, 93 percent of employees of state and local government in Pennsylvania participate in Social Security.
Authorizing Statutes and Board Structure
Pennsylvania Consolidated Statutes Title 24 Chapter 85 establishes the PSERS board, which is made up of 15 members, including two members of the state senate and two members of the state house of representatives.
Pennsylvania Consolidated Statutes Title 71 Chapter 59 establishes the SERS board, which is made up of 11 members.
The Pennsylvania Public Retirement Law creates the PMRS and establishes its governing board, which is made up of 11 members.
Details regarding the composition of these and other retirement boards is accessible via the Retirement and Investment Board Characteristics search tool located at the bottom of this page.
Fiduciary Duty/Prudence Standard
Pennsylvania Consolidated Statutes Title 24 Chapter 85 establishes the PSERS board, which is made up of 15 members, including two members of the state senate and two members of the state house of representatives.
Pennsylvania Consolidated Statutes Title 71 Chapter 59 establishes the SERS board, which is made up of 11 members.
The Pennsylvania Public Retirement Law creates the PMRS and establishes its governing board, which is made up of 11 members.
Details regarding the composition of these and other retirement boards is accessible via the Retirement and Investment Board Characteristics search tool located at the bottom of this page.
Fiduciary Duty/Prudence Standard
Pennsylvania Consolidated Statutes Title 24 Subchapter B § 8521 and Title 71 Subchapter C § 5931 prescribe the investment standard of care for the PSERS and SERS boards, as follows:
Regardless of any other provision of law governing the investments of funds under the control of an administrative board of the State government, the trustees shall have exclusive control and management of the said fund and full power to invest the same, in accordance with the provisions of this section, subject, however, to the exercise of that degree of judgment, skill and care under the circumstances then prevailing which persons of prudence, discretion and intelligence who are familiar with such matters exercise in the management of their own affairs not in regard to speculation, but in regard to the permanent disposition of the fund, considering the probable income to be derived therefrom as well as the probable safety of their capital.
Consolidated Statutes Title 20 Chapter 73 prescribe the investment standard of care for those who oversee municipal pension assets, as follows:
Authorized investments; in general.
(a) Specifically authorized.--Subject only to the provisions of the governing instrument, if any, a fiduciary may accept, hold, invest in, and retain, any of the investments authorized by this chapter, and shall not be liable for loss on such investments so long as he exercises due care and prudence in the performance of his duties in regard to them. "Legal investment" or "authorized investment" or words of similar import used in a trust instrument shall be construed to mean any investment authorized by this chapter.
(b) Prudent man rule.--Any investment shall be an authorized investment if purchased or retained in the exercise of that degree of judgment and care, under the circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income to be derived therefrom as well as the probable safety of their capital. The authorization to make and retain investments pursuant to this subsection shall be in addition to, and independent of, authorizations to make investments pursuant to other provisions of this chapter and requirements applicable under other provisions of this chapter shall not affect investments also authorized by this subsection.
Legal Protections of Retirement Benefits
No explicit constitutional protection for public pension benefits, but courts protect contractual pension rights based on impairment of contract principles. Kelley v. State Employees' Retirement Bd., 890 A.2d 1173 (Pa. Cmwlth. 2006) (holding retirement code is like a contract for pension benefits and unilateral modifications may not be adverse to a member who has met retirement eligibility requirements), affirmed in part, reversed in part, Kelley v. State Employees' Retirement Bd., 593 Pa. 487, 932 A.2d 61 (Pa. 2007) (holding that exclusion of former legislators from Class AA membership was rationally related to preventing substantial burden on retirement system); Association of Pennsylvania State College Faculties v. State System of Higher Education, 479 A.2d 962 (1984) (unilateral modifications in the retirement system may not be adverse to a member who has met retirement eligibility requirements). (PA CONST., Article 1, §17) Source: Robert Klausner, Esq., State Constitutional Protections for Public Sector Retirement Benefits
See also the following search tools:
Retirement System Account Interest Policies | Economic Actuarial Assumptions | Retirement and Investment Board Characteristics |
Information about interest rates applied to account balances of inactive plan participants | Assumed rates of investment return and inflation | Composition and characteristics of public retirement and investment oversight boards |
Mortality Assumptions | Plan Design Features | Post-retirement Employment Policies |
Public retirement system actuarial assumptions for mortality | Numerous elements of retirement plan design | Policies governing return-to-work for retirement system annuitants |
More Data
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Population (2023) 12,961,683 |
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Pennsylvania public pension statistics, per U.S. Census Bureau as of FY 2023) |
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Assets |
$138.6 billion |
Active Members |
458,595 |
Annuitants |
508,587 |
Benefits Paid |
$15.2 billion |
Employee Contributions |
$2.1 billion |
Employer Contributions |
$9.3 billion |
Systems |
Three state systems and more than 1,500 local systems. |
Other Resources
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History of the PA State Employees' Retirement System