Summary
Philadelphia’s Pension System: Reducing Risk and Achieving Fiscal Stability examines the long-term fiscal risks posed by the City’s pension obligations, which have escalated as funding levels declined. The report finds that Philadelphia’s pension system was only 47.4% funded as of FY15, among the lowest ratios of major U.S. cities, and that required pension contributions have outpaced wage growth. The report recommends shifting all new hires to a hybrid defined benefit-defined contribution plan, increasing employee contributions to align with national standards, and securing dedicated revenue sources to stabilize funding. It also suggests eliminating the Deferred Retirement Option Plan (DROP) to reduce excess costs and implementing periodic actuarial audits to ensure financial sustainability. The analysis underscores the urgent need for structural pension reforms to prevent further budgetary strain and to protect the City’s financial stability.