Pennsylvania Policy: Benefits are Determined for New Hires

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Introduction
A pension plan can be conceived as a form of compensation that remits payment to employees after their retirement. Pension plans are consequently determined as either a defined benefit plan or a defined contributive plan. As determined, a defined contributive plan occurs when an employee and employer make periodic contributions to a developed pension account that is either invested in securities or bonds. An employee benefits from this plan from the actual amount contributed on the pension account during his period of retirement. On the other hand, a defined pension plan differs from the defined contributive plan since it does not offer unfunded liabilities.
The defined benefit plan occurs in the event that an employee is promised a specified benefit upon retirement. This approach takes consideration of the employee’s period of service, age during the period of retirement and annual earnings. It can be determined that, contribution rates for the defined this type of pension plan is primarily based on an employees fixed periodic contribution that is combined with their generated income from their investments. The employer is required to remit these payments into the pension account with the aim of ensuring that the plan is funded.
The local and state governments of Pennsylvania have enacted policies aimed at the establishment of defined benefit plans that are utilized to encourage stable workforces over a long-term period. Considering that the defined contribution plan has the capacity to offer an increased rate of benefit that is arrived at by determining the number of years worked, age at retirement and an average salary, it has the capacity to provide incentives that can encourage a long-term and stable workforce. This paper seeks to establish the Pennsylvania Pension system.
Pennsylvania’s Municipal Pension Schemes
According to the state and the local pension scheme report card, the Pennsylvanian pension plan developed for the state’s employees is considered to have received a failing grade. As a result of this, the state’s pension plan system is ranked as the third-worst within this state in covering the newly employed state employees. These poor scores are attributed to the inadequacies in funding, penalties imposed on work at an older age, thus reducing the lifetime benefits for the older workers, and the provision of limited retirement benefits to short-termed employees. An example of this can be seen in employees who enter the workforce at the age of 25 years (Bradford, H.2013.pp.65).
These employees are required to work for 32 years before they have the capacity to accumulate their rights to a future pension plan, a factor that seems worth more than their desired plan contributions. This determines that younger employees are bound to receive little or no benefits from the compensatory services since they are required to wait for a considerable amount of time in order to collect their pensions. Additionally, those who receive benefits do not get adequate coverage since these benefits are linked to low wages and salaries that are earned in these careers. According to Wiedman, Christine, & Heather Wier (2015), the state of Pennsylvania has close to 3,229 municipal pension schemes, a number that is considered to be higher than that of any state. It is also essential to determine that 73% of this state pension schemes are considered as defined benefit plans, with 27 % defined contributions (pp.24). This clearly depicts the state’s wide pension benefits plan that vary in different contexts, with the older groups serving the state for a longer period known to benefit more than the short-term employees.
How Benefits are Determined for New Hires
The newly employed state personnels are in many instances enrolled under the job category SERS under the category of Class A-3 members. These employees are susceptible to receive a lifetime pension plan that is equivalent to 2% of their average salary multiplied by the number of years in service (Adonov, Bauer, & Cremers, pp.23). At this point, their average salaries are calculated over their three highest years of service. On the other hand, a long-term service supplement is also offered for those who have been in service for a period of 40 years, a factor that increases their retirement annuity by 2 % of the number served in excess.
It is essential to consider that these employees are only capable of collecting their pension benefits when they reach the age of 65 after the completion of 10 years in service. This determines that younger employees ar...