New Castle News

September 6, 2013

Bill would create statewide police pension system

John Finnerty

HARRISBURG — A state lawmaker has introduced a bill that would create a statewide pension system for local police, a move he said will save municipalities millions in administrative costs.

State Rep. Glenn Grell’s bill would require all new police officers be enrolled in the statewide pension. The legislation would also allow municipalities to completely roll their full plans into the statewide system, as long as their plan is strong financial shape and existing members agree.

Grell, R-Cumberland County, said that struggling plans are barred from merging with the statewide plan in order to keep the bill from being seen as a bailout of poorly-managed pensions.

Local governments in Pennsylvania operate 3,200 pensions for a variety of different types of employees, including more than 900 for police officers.

Grell said those pensions have millions in administrative costs that could be saved by merging the plans. The police pensions tend to be among the most inefficient in terms of administrative costs, because many local forces only have a handful of officers.

An analysis by the Pennsylvania Employee Retirement Committee estimated the average cost of administering a plan of 10 or fewer members is $1,568 per member, Grell said. The cost of administering the plan with 500 or more members is only $334 per member.

Grell said 70 percent of local police pensions have fewer than 10 members.

Controversially, the measure would keep the police retirees in a defined-benefit pension plan at a time when Republicans, including the governor, are pushing to move public employees into 401(k)-style retirement plans.

“We cannot afford another defined-benefit plan,” said state Rep. Fred Keller, R-Union County.

It is an argument made earlier this year when another Republican lawmaker introduced a bill that would solve the municipal pension crisis by mandating the pensions be converted from defined-benefit plans to cash balance plans. That bill was strongly backed by lobbying groups for local governments.

Grell’s bill is preferred by the Fraternal Order of Police.

“We think it’s the right answer,” said Les Neri, president of the State Lodge of the Fraternal Order of Police.

Neri said the campaigns to alter the pensions for public sector employees — both at the state and local levels — are “distasteful” because they pit workers against workers. The problems with financially-ailing pensions are mostly due to poor decisions by elected officials who failed to make the employer contributions for years at a time, Neri said.

Still, of all government employees, police officers may have the strongest case for needing defined-benefit plans.

“We don’t want police officers who are working in their 60s,” he said. “Because they have less longevity in their jobs, they don’t have the opportunity to pay into their pensions.”

The defined-benefit pension is also important for police because it provides a funding mechanism to provide benefits for officers injured in the line of duty. “If an officer is only on the force a couple years and then he’s hurt,” Neri said, “under a defined-contribution plan, he’d have nothing.”

Lawmakers said they expect neither plan addressing municipal pensions will be acted upon until after the Legislature comes up with some strategy to deal with the ailing pensions for state workers. The two main pensions for state workers have a combined unfunded liability of $47 billion.

“We can’t tell local governments what to do with their pensions,” Grell said, “until we figure out what to do with ours.”

How are Lawrence County’s funds?

Following is a list of municipalities in Lawrence County with police pension funds.

The name of each community is followed by the number of workers in the plan and the funding ratio:

Ellwood City — nine, 85 percent

Neshannock Township — seven, 119 percent

New Castle — 36, 59 percent

New Wilmington — three, 161 percent

Pulaski Township — two, 202 percent

Shenango Township — six, 129 percent

Union Township — four, 52 percent.