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The Associated Press June 15, 2010, 3:53PM ET

Pa. House OKs new limits on public-sector pensions

The House on Tuesday voted for new rules for Pennsylvania's two large government pension plans that would reduce the size of a looming jump in costs to taxpayers and cut some benefits for new hires.

The House passed an amendment that, among other things, would raise the standard retirement age to 65 for both the Public School Employees' Retirement System and the State Employees' Retirement System. It also would require at least 10 years of service to vest, instead of five.

The size of pensions for people who are hired in the future would be cut by one-fifth, unless the employees agree to have more money taken out of their paychecks. Retirees would no longer be able to withdraw their own contributions in a lump-sum cash payment upon retirement.

All the proposed changes would affect new employees only. They would not apply to anyone hired before June 30, 2011, for PSERS, and before Dec. 31, 2010, for SERS.

The underlying bill -- which could get a vote on final passage in the House as early as Wednesday -- would add to the long-term cost of the pension systems but reduce the projected size of crippling payments due into both systems in two years.

It would gradually limit the amount of a single year's increase in costs to governments and school districts to eventually reach no more than 4.5 percent of payroll.

The bill's prospects in the House appeared bright, given its wide support by members of both parties. A final vote on the bill would send it to the state Senate.

"It accomplishes short-term relief, which is so essential, but it also incorporates long-term reform," said Rep. Glen Grell, R-Cumberland, a leading lawmaker on pension issues.

The two large public-sector pension plans are facing a potential financial catastrophe because of several factors, including stock market losses and benefit increases lawmakers voted for themselves and others a decade ago.

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