Fiscal Measure is Important Step Forward in Strengthening Commonwealth's Fiscal Health
SAN JUAN, Puerto Rico, Dec. 23, 2013 /PRNewswire-USNewswire/ -- Today, the Puerto Rico Senate approved the Teacher's Pension System reform bill submitted by Governor Alejandro Garcia Padilla last week. The Senate's approval follows Saturday night's passage by the House of Representatives. The bill now goes to the governor's desk to be signed into law.
"Reforming the Commonwealth's Teacher Pension System is an important step forward in making the structural changes Puerto Rico needs to strengthen its long-term fiscal health," said Garcia Padilla. "Teachers are integral in shaping our future, and these policy changes reflect a compromise between teachers and my Administration that will ensure that teachers can retire with confidence in the long-term economic viability of our pension system."
The reform will stabilize the Commonwealth's finances and safeguard Puerto Rico's public school teachers' retirement by addressing a more than $500 million annual projected pay-as-you go shortfall. The bill addresses most of the issues raised by the teachers' unions regarding reform measures, including:
- Guarantees benefits accrued up to July 31, 2014.
- A freeze of benefits under the existing defined benefit system and the transfer of all plan participants to a defined contribution system with benefits paid as a lifetime annuity.
- Eliminates the "merit pension," which provided a pension up to 75 percent of salary.
- Establishes a minimum pension of $1,625 for all teachers.
- Increases the retirement age to 55 years of age with 30 years of service for current employees and 62 years of age and 30 years of service for future employees.
- Increases the employee contribution by 1 percent and effecting future increases upon actuarial certifications.
- Reduces special law benefits for retirees and eliminates them for future retirees, with resulting savings kept by the pension system.
- Injects $30 million annual contribution to the system in FY2017 and in FY2018, and a $60 million annual contribution in every subsequent fiscal year beginning in FY2019 and ending in FY2042. A supplemental annual contribution will also be provided beginning in FY2019.
SOURCE The Office of Governor Alejandro Garcia Padilla