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Pennsylvania Retirement System

Pennsylvania manages its state government employees’ pensions through two different systems: Pennsylvania State Employees’ Retirement System (SERS) and Public School Employees’ Retirement System (PSERS). SERS manages the public pension system for most state employees while PSERS serves state employees in the field of education. If you want extra guidance navigate the Pennsylvania retirement system, use SmartAsset’s free financial advisor match tool to get paired up with an expert in your area.

Types of Retirement Systems in Pennsylvania
There are currently more than 700,000 billion employees of Pennsylvania state whose retirement savings are managed by the state’s retirement systems. If you are a state employee not in education, the SERS manages your pension. If you work in public education, PSERS manages your retirement savings. If you’ve worked for both sectors, you can still benefit from both pension plans, which you can find out more about below.

Pennsylvania Retirement Systems
Plan Title Eligible Employees
State Employees’ Retirement System – Full-time employees.
– Part-time employees who work for at least either 750 hours or 100 days in a calendar year.
Public School Employees’ Retirement System – Full-time public school employees.
– Part-time hourly public school employees who render at least 500 hours of service in the school year.
– Part-time per diem public school employees who render at least 80 days of service in the school year in any of the 775 reporting entities in Pennsylvania.

Overview of Pennsylvania Main Retirement Systems

Pennsylvania Retirement System

State Employees’ Retirement System – SERS covers full-time state employees who are not public school employees. On a new employee’s first day, his or her employer will automatically enroll the new employee in SERS and begin making employer contributions to the employee’s eventual pension. Employers will also begin withholding employee contributions from the employee’s paycheck starting on the first day of employment.

Part-time employees are not automatically enrolled in SERS. You will have to work for either 750 hours or 100 days in a calendar year to qualify for enrollment. Once you reach this requirement, you must join SERS. Your employer will automatically enroll you at that time. After your enrollment, you do not have to continue to meet those requirements each year.

Pennsylvania Retirement Code also allows certain state employees to decide whether they want to join SERS or not. This includes the governor, lieutenant governor, members of the General Assembly, heads or deputy heads of administrative departments, members of departmental boards or commissions, the Secretary to the Governor, the Budget Secretary and legislative employees.

You can also elect for “multiple service” in the case you have previously worked for a public education employer in Pennsylvania or have credited service with PSERS. That way, you can combine your services under both retirement systems into a single pension when you retire. If this applies to you, you’ll need to elect multiple service within 365 days of joining SERS.

Public School Employees’ Retirement System – Public school employers must report all of their employees to PSERS. Membership is mandatory for full-time state education employees. A percentage of your full-time salary go toward your retirement benefit from your first day of employment.

Part-time employees have the opportunity to waive PSERS membership. If you want to enroll, however, you will have to meet certain qualifications within one fiscal year and not across multiple years. Part-Time Salaried employees are eligible for PSERS membership from the first day of employment. Part-time hourly employees must work at least 500 hours to become eligible for enrollment and part-time per diem employees must work at least 80 days to become eligible. Once you qualify for membership, you remain a member until a break in membership. Your paycheck deductions become mandatory once you qualify as a member.

As with SERS, there is the option to elect multiple service through PSERS. This applies if the Commonwealth of Pennsylvania was formerly your employer. Again, you’ll have 365 days to elect from the moment you’re enrolled in PSERS.

Retirement Taxes in Pennsylvania

Pennsylvania Retirement System

While you’re working and contributing to your SERS pension plan, you won’t have to withhold any amounts for federal taxes. However, the pension payments you take in retirement are subject to federal income tax. You could then choose instead to withhold money from your monthly pension payments while you are contributing to the account. You can authorize withholding, or change your withholding settings, by submitting a Annuitant Federal Income Tax Withholding form.

On the whole, Pennsylvania is pretty tax-friendly toward retirees. The state won’t tax your withdrawals from your retirement accounts. Pennsylvania won’t tax your public and private pension income either as long as you’re older than 59.5 years old.

To figure out your withholding amounts and taxable income, you could employ a financial advisor to help you out. The right advisor can offer a more professional and comprehensive look at your finances. This can help you optimize your tax bill and save you some money in other areas, as well. To get started, take our short financial advisor matching quiz. This tool will connect you with qualified advisors in your area who can work with you on your specific financial needs.

Current Financial Health of the Pennsylvania Retirement System
Together, both SERS and PSERS fund the pensions of more than 700,000 active and retired state workers. In 2017, SERS paid about $3.3 billion in benefits and managed more than $29 billion in assets. In the same year, PSERS managed about $53.5 billion in assets and an estimated annual active payroll of $13.37 billion.

Tips for Saving for Retirement

  • There is no such thing as starting too early when it comes to saving for retirement. You should start saving as soon as you can. This could mean opening up a savings account like an IRA early on, one dedicated solely to your retirement fund. It could also mean your retirement savings start with your first 401(k).
  • When setting aside money for your retirement through an employer-sponsored plan, you should try to withhold as much as you responsibly can. That way, not only will you see a smaller tax bite, but you’ll be doing your retired self a favor. Don’t forget that the right financial advisor can help you figure this out in regards to what’s best for you and your finances.

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Lauren Perez, CEPF® Lauren Perez writes on a variety of personal finance topics for SmartAsset, with a special expertise in savings, banking and credit cards. She is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. Lauren has a degree in English from the University of Rochester where she focused on Language, Media and Communications. She is originally from Los Angeles. While prone to the occasional shopping spree, Lauren has been aware of the importance of money management and savings since she was young. Lauren loves being able to make credit card and retirement account recommendations to friends and family based on the hours of research she completes at SmartAsset.
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