SUMMARY OF THE PUBLIC
EMPLOYEE BENEFITS REFORM INITIATIVE
The Public Employee Benefits Reform Initiative places responsible limits on the defined benefit pension and retiree health care plans
that can be offered to new state and local government employees
hired after July 1, 2009.
New Full Retirement Ages
The full retirement ages for new government employees are increased
to 55 years for police and firefighters, 60 years for other public
safety employees and the appropriate Social Security retirement age
(65-67) for all other job classifications. New government employees
may retire at earlier ages with actuarially reduced pension and
health benefits.
New Limits on Pension Benefits
The maximum defined benefit pension formulas have to be recalculated
to provide, when combined with any Social Security payments, a
60-67% replacement income for new government employees who spend
their entire career working for government or education agencies.
The formulas used to calculate pension payments are as follows:
Police Officers and
Firefighters
Other Safety
All other Non-Social Security
All other Social Security |
2.2% x highest ave
salary x years of service @55
1.8% x highest ave salary x years of service @60
1.5% highest ave salary x years of service @SS Age
1.0% highest ave salary x years of service @SS Age |
Highest Average Salary Calculation
Pension funds would use an average of the highest consecutive five
years of base wages, excluding all other additions such as overtime
pay, bonus pay, severance pay or payouts for unused vacation or sick
days.
Minimum Vesting Requirements
New employees would need to work 5 or more consecutive years for a
public agency or agencies to qualify for lifetime pension benefits.
Lifetime retiree health benefits would only be available to new
employees who work ten years for one or more public agencies and
have at least five consecutive years immediately prior to
retirement.
Cost of Living Adjustments
Cost of living adjustments of up to 3% a year may be provided to
retirees after 5 years should the inflation-adjusted purchasing
power of their original benefit fall below 80%. If a pension fund's
funding status is above 110%, the public agency may grant an
increase of up to 3% each year to all retirees so long as the
funding status does not drop below 110%.
Retroactive Benefit Increases Prohibited
No retroactive increases in pension or retiree health benefits may
be granted to any employee (including current employees).
Raids on Pension and Retiree Health Funds Prohibited
Public agencies are required to make full payments to their pension
and retiree health care funds each year, regardless of their funding
status. Money may not be taken out of pension or retiree health
care funds for any purpose other than providing the benefits for
which they were established. These protections apply to all funds,
including those set aside for current public employees.
Expand Local Control
The initiative establishes prudent limits on defined benefit pension
and retiree health care plans. State and local government agencies
may provide lower benefits as they see fit and may offer other forms
of deferred compensation that are not defined benefit plans. In
addition, the terms of retirement benefits offered to new employees
will remain the exclusive authority of public agencies and cannot be
included in collective bargaining agreements.
Voter Approved Increases
With the approval of a two thirds vote of their constituents during
a statewide general election, any local agency may exceed the
pension benefit formulas contained in the initiative. By a three
fourths vote of both houses, the state legislature may exceed the
benefit levels for state employees and the University of California
without voter approval.
Death and Disability Benefits Not Affected
The initiative clearly states that the death and disability benefits
offered to current and new employees are not affected by this
initiative.
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