Pennsylvania Has a Looming Retirement Crisis

From PA Treasury

Read entire PA Treasury Notes (includes informational graphics)

A changing twenty-first century economic landscape along with the generational shift away from pensions or “defined benefit” plans to 401(k)s or “defined contribution” plans–or no plan at all–has left too many Pennsylvanians behind. In this issue of Treasury Notes, we will present some underlying causes of our retirement crunch, and the stark consequences that will affect us all if Pennsylvania does not act.

For decades, many Americans could draw on all “three legs of the retirement stool:” retirement savings plans, pensions and Social Security. According to the Social Security Administration (SSA), the average worker can expect 40 percent of their earnings to be replaced by Social Security payments. That’s about half of what financial advisors recommend to maintain one’s pre-retirement standard of living.

Pensions’ share of our retirement pie is declining. In 1983, according to the Center for Retirement Research at Boston College, 62 percent of private sector workers with a retirement plan had a pension. This number declined to just 17 percent of workers by 2016. 

While defined contribution plans have increased, they have not offset the decline in pensions leaving a gap in coverage for Pennsylvania workers. Depending on how various surveys treat the cash value of existing pension benefits, one-third to one-half of private sector American workers report having zero retirement savings. According to both Pew Charitable Trusts and AARP, about 44 percent of Pennsylvania workers ages 18 to 64–or 2.1 million people–in the private sector work for businesses that do not offer any retirement plan. To put this number into context, if 2.1 million Pennsylvanians banded together to form a new locality in our Commonwealth, it would result in a city larger in population than Philadelphia, Pittsburgh, Allentown, and Erie combined.

Small businesses face disproportionate burdens of cost, complexity, and potential legal liability when offering retirement plans. A Pew analysis concluded that costs for a small business to offer a retirement plan can be four times higher than those available to a larger employer. The Employee Retirement Income Security Act of 1974 or “ERISA” is a federal law originally passed to ensure pensions and other employer-sponsored benefits are properly funded and managed. Chief Justice John Roberts in a 2010 case noted that ERISA “is an enormously complex and detailed statute….many ERISA matters….are exceedingly complicated.” ERISA provides for damages, class-actions, as well as plaintiffs’ attorney fees in most cases. ERISA also imposes fiduciary duties on plan managers, the highest legal duty available in the common law legal system.

The result? 71 percent of small employers in a recent Pew survey said that a retirement plan was simply too expensive to set up. And, according to the Transamerica Center for Retirement Studies’ Survey, nearly three-quarters of employers that do not offer their workers a defined contribution plan are not likely to implement the option any time soon.

Econsult Solutions, at the request of Treasury, examined the Commonwealth’s broad demographic trends, current retirement savings, and any net fiscal impact on the state if nothing changes. The oldest baby boomers (born between 1946 and 1964) first reached 65 in 2011 and will continue to retire through 2029. The disproportionate share of boomers across the United States and the consequences of their retirement are difficult to understate. Per Econsult, “these demographic changes will be especially pronounced in Pennsylvania, which is currently the seventh oldest state in the nation…the near-retiree age groups from 50- 64…collectively represent 2.7 million residents…or 21 percent of the state’s population. Projections from the Pennsylvania Independent Fiscal Office (IFO) estimate that the population of residents age 65 and older will increase to 3.1 million by 2030, representing 23 percent of the state’s population.”

The nation’s muddled, incomplete transition to defined contribution plans coupled with Pennsylvania’s rapidly aging population, will impact the Commonwealth’s bottom line. If we do nothing, Pennsylvanians’ collective lack of retirement savings will mean reduced economic activity, fewer jobs, and lost tax revenue.

Workers retiring with scant to no savings will qualify for a slew of federally-mandated public benefits including food stamps, Medicaid, and other types of assistance. Econsult’s study further found that “in 2015, the state spent $4.2 billion in state assistance costs for elderly residents, more than half of which was for assistance for the 21 percent of the population with $20,000 or less in household income. State assistance costs would have been $702 million less if elderly households had sufficient retirement savings. In 2030, the state would spend $1.1 billion less if elderly households had sufficient savings.” In other words, our poorly designed retirement system will add a cumulative $14.3 billion in assistance costs to the already strained state budget over a 15 year period.

To put $14.3 billion in context, that’s triple what the state will spend over the course of the recently enacted 2019-2020 budget on state agricultural programs, community and economic development, conservation, state parks, criminal justice including state prisons, drug and alcohol programs, community college aid, state financial aid, environmental protection, children’s health care, public libraries, and the overhead costs of the Governor, Lt. Governor, Attorney General, Auditor General, and Treasury combined.

In 2017, the PA Treasury created the Pennsylvania Treasury Task Force for Private Sector Retirement Security–a bipartisan group of policymakers, experts, and other stakeholders–to not only gather information on the state of the crisis, but to find solutions.

Next week, look for another article from the PA Treasury that discuss this Task Force’s proposal for the Commonwealth: a scaled, automated retirement account or “auto-IRA.”

Welcome Back SERVPRO of Columbia, Montour & Sullivan Counties

More than 400 businesses and organizations belong to the Chamber to receive benefits and support efforts to strengthen their businesses and our region. Increased membership allows us to offer additional programs and benefits, have a stronger voice in advocacy and be involved in more activities and initiatives in our communities. The Chamber welcomes its newest member, SERVPRO of Columbia, Montour & Sullivan Counties, to help us fulfill our mission.

Previously a Chamber member that the Chamber is happy to welcome back, SERVPRO of Columbia, Montour & Sullivan Counties is a franchise of SERVPRO, a national company specializing in fire and water cleanup and restoration. Its goal is to help minimize the interruption to its customers’ lives and quickly make it “like it never even happened,” and provides 24-hour emergency service. Founded in 2001, SERVPRO’s local office is locally owned and has numerous professional certifications. Its local office is located in Berwick, and can be reached at 570-759-0966 or by email or visit its website

Leaders are Enlargers!

From Caz Russell LLC

With good leadership, everything improves. Leaders are lifters. Leaders transfer ownership for work to those who execute the work. Leaders coach the development of personal capabilities. Leaders learn quickly and encourage others to learn efficiently also.

If you want to give a team a lift, then provide it with better leadership! Players who enlarge their teammates have several things in common:

1. Enlargers value their teammates. People’s performances usually reflect the expectations of those they respect.

2. Enlargers know and relate to what their teammates value. Players who enlarge others understand what their teammate’s value. That kind of knowledge, along with a desire to relate to their fellow players, creates a strong connection between teammates.

3. Enlargers add value to their teammates. An enlarge looks for the gifts, talents and uniqueness in other people, and then helps them increase those abilities for their benefit and for that of the entire team.

4. Enlargers make themselves more valuable. You cannot give what you do not have. If you want to increase the ability of a teammate, make yourself better.

Visit the Chamber’s business consultants category for more on Caz Russell and all of our member consultants. 

Dental Hygiene Month

From rabbittransit

Did you know that oral health is connected to your overall health and well-being? October is Dental Hygiene Month. You can protect your oral health by practicing good dental hygiene: brush your teeth at least twice daily, floss and use mouthwash after brushing, limit the amount of sugars in your diet, and see the dentist regularly for checkups and cleanings.

Need a ride to the dentist? Let us take you! rabbittransit can provide safe, reliable transportation for you. Seniors 65 years of age and older are eligible for Paratransit, often referred to as “Shared Ride.” Shared Ride is door-to-door bus service providing trips that are grouped together between multiple customers. There are no restrictions on the reason you may use our services, so the Senior Shared Ride Program can be used for all kinds of trips such as; medical appointments, grocery shopping, beauty salons, banking, recreation, physical therapy, visiting, fitness, Adult Day Care and more! There may a co-pay each time you board the vehicle. The cost depends on many different factors. You’ll love how easy it is to schedule your own appointments using

Call 1-800-632-9063 today to speak with the mobility planning department to discuss your transportation needs and what you need to do to start using rabbittransit!

P.S. If you’re looking for a dentist during this Dental Hygiene Month, check out one of our member dentists

New SEKISUI SPI Professional Experience Lab Opens at Bloomsburg University’s Greenly Center

(L-R): Chris Young, Columbia County Commissioner; Bill Kreisher, Town of Bloomsburg Mayor; Dave Kovach, Columbia County Commissioner; Dr. Bashar Hanna, Bloomsburg University President; Fred Gaffney, Columbia Montour Chamber President; Ronn Cort, SEKISUI SPI COO & President

After officially opening its doors to students and professionals at the beginning of the school year, the SEKISUI SPI Professional Experience Lab at Bloomsburg University’s Greenly Center held an Open House for community and Chamber members along with a ribbon cutting on Wednesday, Oct. 2. 

The new lab was made possible by a generous donation from SEKISUI SPI. Located on the third floor of the Greenly Center, the space is intended to serve as a collaborative learning space for our students, faculty and community members to share ideas and experiences and improve professional development opportunities. Students will train in several areas, including job interviewing, virtual presentations, competitions, conflict resolution and much more. The center will also help increase student activity in downtown Bloomsburg, which is one of the long term goals of the Greenly Center.