Pittsburgh’s defined-benefit pension problems are typical for such traditional but unsustainable plans. That’s why so many businesses have switched to 401(k)-style defined-contribution plans — as the city should have long ago.
Enough hasn’t been going in to yield enough investment earnings to pay retirees. And Pittsburgh’s retirement-money investments, worth $374 million 12 years ago, have hardly grown since, losing almost $93 million amid 2008’s market crash and worth just $378 million in 2015.
A 2009 state law required minimum 50-percent funding. To avoid a state takeover of its plans, Pittsburgh dedicated $736 million in parking tax revenue through 2041 to pensions. It projects putting enough in by 2018 to cover retirees’ annual payouts. But that’s questionable because Pittsburgh’s fund managers assume an overly optimistic 7.5-percent annual return on investments — and the higher that projected return is, the less the state requires Pittsburgh to put into its pension funds.
Mayor Bill Peduto favors a half-measure: combining defined-benefit and defined-contribution aspects for new employees’ plans. But any change requires state lawmakers’ OK, and public-employee unions’ clout in Harrisburg has long blocked reform.
What’s lacking — in Pittsburgh, in Harrisburg and across Pennsylvania — is the political gumption to accomplish what’s right for public employees, retirees and the public interest: long-overdue public-pension reform.