Update: How will the Governor’s pension plan impact members?
Gov. Jerry Brown presented his plan for reforming California’s pension system Thursday, Oct. 27. Click here for the Gov’s 12-point pension reform (PDF).
His reforms would affect all the pension systems in the state, including the statewide CalPERS system and the local systems that many SEIU 521 members depend on for their retirement security.
After a hard look, SEIU California pronounced the plan a good first step:
Gov. Brown’s proposal starts the conversation on retirement security that will help shape the future for the millions of people reaching retirement age. We’re paying more, working longer, and earning less … like most Americans. Public and private pension funds were hit hard when Wall Street used our retirement money to fund their extraordinary greed.
But the plan needs to do more than just address public workers’ retirements:
A new UC Berkeley study shows that nearly half of all Californians are headed into a retirement of poverty. In this day and age, that’s just wrong. This is why any reform proposal must include security for the private sector. Vehicles like CalPERS that offer expertise in making sound investments and achieving returns higher than market averages should be available to public and private sector employers and their employees.
Here are highlights of his plan:
- Require a minimum contribution from employees and employers. No more pension holidays, and no more negotiating with employers to pick up the employee share.
- Cutting back on the defined-benefit plan that provides stability for retirees. Instead, a new mandatory 401(k)-style plan would be added, alongside a reduced pension benefit and Social Security.
- Changing the retirement benefit calculation to one based on three years of pay, and limit inclusion of benefits such as vacation cashout, to curb “spiking,” which the public sees as an abuse.
- Raising the retirement age to 67 for most state and local workers. It’s unclear whether early retirements at a lesser benefit would still be allowed.
However, his plan is just a proposal. The real work of reforming California’s pensions started Wednesday, with the first meeting of a committee of the Legislature. It’s up to that committee to create a legislative proposal, and it will be up to the Legislature to fine-tune that proposal.
And the Sacramento Bee has a roundup of reactions, including from Sen. Darrell Steinberg:
The abuses that a small number of people take advantage of absolutely must be resolved. But we can’t forget that the vast majority of public sector employees are middle class workers and their average pensions are far from exorbitant.