Monday, March 19, 2012
Gov. Jerry Brown says his 12-point pension reform plan would cut about half the cost to taxpayers and reduce their risk of pension debt. It includes a number of changes that quickly drew union opposition and some that would require changing the state constitution.
Here are the key elements of Brown’s plan:
Create a hybrid system that combines a smaller defined-benefit pension and a 401(k) plan.
This would shift some, but not all investment risk to workers. Brown envisions combining the hybrid system with Social Security to provide government workers with 75 percent of their salary after 30 years for public safety workers, and after 35 years for others. California is behind other states in considering this option.
Raise minimum ages for pensions and retiree health benefits for new workers. Brown would set retirement eligibility at 67 for most workers.
Require current and future employees to transition to paying half the cost of pension benefits. While state employees currently contribute at least 8 percent of their pay, many local governments make the pension contribution for their workers.
Increase the independence and expertise of pension fund boards. At CalPERS, Brown wants to add two public members with financial expertise and replace the State Personnel Board representative with the state Department of Finance director. Changing the makeup of the boards would require a change in the state Constitution or agreement by the members of the pension system.
End pension spiking. This process pads pensions of workers who are able to use “games and gimmicks” to boost their compensation in their final year of work, Brown said. He wants to base pension benefits on the last three years instead.
Remove perks from pension benefit calculations. Benefits would be based on regular pay without extras, such as special bonuses, unused vacations and sick days, and excessive overtime.
Reduce double dipping. It’s now legal to collect a state pension while earning a state government salary. Take-home pay can be six figures. Brown would limit state pensioners to 960 hours or 120 days of work for a public employer.
End purchases of retirement service credit for time not actually worked. Known as “airtime,” this practice enables those who can afford it to buy their way to bigger pensions. It is unavailable to taxpayers working for private companies.
End retroactive pension increases. The big retroactive pension boosts of 1999 could not be repeated under this part of Brown’s plan.
Prohibit payment of pensions to government workers who commit a felony related to their employment. This idea has been proposed in response to misuse of funds in the city of Bell.
Prohibit pension holidays. This practice allowed employees and employers to suspend contributions in the boom years and left the funds “in a significantly weakened position following the recent market collapse,” Brown said.
Reduce retiree health care costs. Brown’s plan to raise the age of pension eligibility would help this. He also wants to require workers to put in 15 years before the state will pay part of their retiree medical insurance and 25 years for the maximum state contribution.