Media

FOR IMMEDIATE RELEASE
November 2, 2011
Contact: Aaron McLear


California Pension Reform
Files Initiative Proposals

SACRAMENTO – California Pension Reform today filed two initiative proposals with the Attorney General’s Office. After reviewing the title and summary from the Attorney General and the fiscal summary from the Department of Finance, the group will qualify one pension reform initiative on the November 2012 ballot.

“Other than defenders of the status quo, no one disagrees that our unfunded pension and retiree benefit obligations are decimating the capacity of our state and local governments to deliver critical public services.  Unless we act now the situation will only get worse,” said Mike Genest, former California Director of Finance. “While we would prefer to see a legislative solution to this problem, we know full well that there is little chance of that happening. We cannot afford to postpone decisive reform while our elected leaders debate half measures. We must act now.”

“We were encouraged to see the Governor come forward with a serious proposal and have added the elements where his proposal fell short,” said Dan Pellissier of California Pension Reform. “We will file this along with our original proposal and fully evaluate our options after the Attorney General’s Office releases the title and summary of each. There is more than one path to solving our pension crisis and we will work to qualify the best option for the November 2012 ballot.”

Both of these initiative proposals will:

•    Require current government employees to pay a fair share
•    Stop the accumulating debt caused by unfunded pension and retiree benefit liabilities
•    Make pension boards more transparent and accountable
•    End abuses such as career ending spiking and retroactive benefit increases

Below are summaries of both options:

Government Employee Pension Reform Act of 2012
OPTION 1
(click here to read or download)

SUMMARY: The Government Employee Pension Reform Act of 2012 will stop pension system abuses, reduce the costs and debts of government employee pensions and give government employees the same type of retirement benefits earned by most private sector employees.  The reforms apply to all state and local government and special district employees, including school districts, the UC and CSU systems.

New Employees as of July 1, 2013

•    The new retirement plans cannot incur debts or unfunded liabilities, so defined contribution plans will be the most likely option, though defined benefits and annuities underwritten by third parties would be allowed.

•    The employer and employee would make equal contributions to all benefit costs, up to a 6% of salary cap on employer contributions to non-safety employees and 9% of salary for public safety employees.

•    Employees not participating in Social Security would get a replacement benefit that matches the Social Security payment they would otherwise earn, except that full career public safety employees would receive their full benefit at age 60.

•    Death and disability benefits must be provided outside the pension system.

Current Employees

•    Ends spiking by requiring a three year averaging of a government employee’ highest income and excluding from pension calculations all but base wages.

•    Government employers and their employees will equally share the cost of retirement benefits, except while their pension funds are less than 80% funded using federal standards for private sector pension funds, when employees could be required to pay more.

•    When a government agency’s pension plan is less than 80% funded, its contribution to government employee pensions will be capped at 6% of salary for most employees and 9% for public safety employees.  Government employees not earning Social Security would get a normal cost contribution equal to the cost of the replacement benefit being provided to new workers.  Government employees would have to pick up the remainder of normal cost until their pension fund exceeds 80% funding.

•    Current employees facing higher costs for current benefits are able to agree on lower cost defined benefits or transfer to plan being offered to new employees.

For All Employees

•    Death and disability benefits for current employees are not subject to the cost limitations of this initiative.

•    No retroactive benefits may be granted or payments may be made.

•    Employees convicted of felonies pertaining to their public duties shall lose the employer contribution value of their retirement plan.

•    Any annual increase in retiree pension payments cannot exceed the Cost of Living Adjustment provided for Social Security recipients during the same time period.

•    The initiative does not impact health care benefits being provided to employees and retirees.

Government Employee Pension Reform Act of 2012
OPTION 2
(click here to read or download)

SUMMARY: The Government Employee Pension Reform Act of 2012 will stop pension system abuses, reduce the costs and debts of government employee pensions and increase retirement ages for government employees.  The reforms apply to all state and local government and special district employees, including school districts, the UC and CSU systems.

New Employees as of July 1, 2013

•    Retirement benefits estimated to provide 75% replacement income after a full career would come from three sources – a defined contribution plan, a traditional pension and Social Security if applicable.  A full career for safety employees would be 30 years, ending at age 58.  A full career for non-safety employees would be 35 years, ending at age 67.  Five year early retirement would be allowed.

•    The maximum pension payment is capped at $100,000 with cola.  For government employees with Social Security coverage, no more than 25 percent of replacement income comes from the pension.  For those without Social Security, 50% would come from the pension.

•    The employee and employer must equally share all costs for the plan, including unfunded liabilities.

•    Requires low cost defined contribution plans that provide a wide range of professionally managed options, including annuities that provide stable, lifetime income.

Current Employees

•    The initiative does not change the benefits being earned by current employees, only the way the costs are split between government employees and government employers.

•    Government employers and their employees will equally share the cost of retirement benefits, except while their pension funds are less than 80% funded using federal standards for private sector pension funds, when employees could be required to pay more for their same benefits and for a share of unfunded liabilities.

•    When a government agency’s pension plan is less than 80% funded, its contribution to government employee pensions will be capped at 6% of salary for most employees and 9% for public safety employees.  Government employees not earning Social Security would get a normal cost contribution equal to the cost of the replacement benefit being provided to new workers.  Government employees would have to pick up the remainder of normal cost until their pension fund exceeds 80% funding.

•    Current employees facing higher costs for current benefits are able to agree on lower cost defined benefits or transfer to the hybrid plan being offered to new employees.

For All Employees

•    Ends spiking by requiring a three year averaging of a government employee’ highest income and excluding from pension calculations all but base wages.

•    Death and disability benefits for current employees are not subject to the cost limitations of this initiative.

•    No retroactive benefits may be granted or payments may be made.

•    Employers and employees must make full pension payments every year unless their plan is 120 funded.

•    No airtime can be purchased.

•    Employees convicted of felonies pertaining to their public duties shall lose the employer contribution value of their retirement plan.

•    Any annual increase in retiree pension payments cannot exceed the Cost of Living Adjustment provided for Social Security recipients during the same time period.

•    The initiative does not impact health care benefits being provided to employees and retirees.

California Pension Reform is an organization dedicated to improving the California’s economic climate by fixing the state’s unfunded and unsustainable pension liabilities and retiree benefit entitlements.

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