House Bill 1874 and House Bill 1884 are pieces of companion legislation designed to secure distressed municipal pension systems in Pennsylvania.  Together both of these bills will address several short and long term pension issues.  House Bill 1874 amends Act 205, the Municipal Pension Plan Funding Standard and Recovery Act, through a three-tiered plan for dealing with distressed municipalities that was designed by the Pennsylvania Employee Retirement Commission (PERC).  In the short term, it addresses the impact of the 2008 market crisis by introducing asset smoothing techniques.  It also allows municipalities to temporarily pay a reduced pension payment.  These changes would reduce the 2009 pension obligations by nearly 30%, and they would prevent 70 healthy municipal pension plans from becoming underfunded.

This legislation also addresses long-term pension issues by classifying all municipal pension plans based on their funding level using the following scale:

• Level 1: 70-89% funded
• Level 2: 50-69% funded
• Level 3: below 50% funded

Level 2 distressed pensions must submit plans for improvement to the State.  Level 3 distressed pension systems will be administered by Pennsylvania Municipal Retirement System.  House Bill 1884 deals specifically with the administration of Level 3 plans.