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CA Pension Reform Initiatives

CA Pension Reform Initiatives

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Published by John Myers
Press release announcing 2 initiative aimed to change pensions in California.
Press release announcing 2 initiative aimed to change pensions in California.

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Published by: John Myers on Nov 02, 2011
Copyright:Attribution Non-commercial


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FOR IMMEDIATE RELEASENovember 2, 2011Contact: Aaron McLear916-753-3699
SACRAMENTO - California Pension Reform today filed two initiativeproposals with the Attorney General’s Office. After reviewing the titlesand summaries from the Attorney General and the fiscal summariesfrom the Department of Finance, the group will qualify one pensionreform initiative on the November 2012 ballot."Comprehensive government pension reform is essential to the fiscalhealth of California,” said former United States Secretary of StateGeorge Shultz. “For far too long the leaders of this state have failed toaddress the growing problem of unfunded pension liabilities.According to the legislature’s own watchdog agency, the unfundedliability is a bill in excess of $20,000 owed by every household inCalifornia. Unless we act now, the situation only will get worse and willhave a devastating impact on public safety, education and criticalsafety net services. This effort is a full and thoughtful solution that inthe short term will stop the fiscal hemorrhaging and in the long termsets an example of how to get this state back on track.”“Other than defenders of the status quo, no one disagrees that ourunfunded pension and retiree benefit obligations are decimating thecapacity of our state and local governments to deliver critical publicservices. Unless we act now the situation will only get worse,” saidMike Genest, former California Director of Finance. “While we wouldprefer to see a legislative solution to this problem, we know full wellthat there is little chance of that happening. We cannot afford topostpone decisive reform while our elected leaders debate half measures. We must act now.”"We were encouraged to see the Governor advance a serious pensionreform proposal and have strengthened key elements where hisproposal fell short,” said Dan Pellissier of California Pension Reform.“We will file this alternative along with our original proposal and makea decision which to circulate in January. There is more than one path tosolving our pension crisis and we will qualify the best option for theNovember 2012 ballot.”Both proposals will accomplish the following:
Requires current government employees to pay their fair share
Makes benefits for new workers comparable to benefits in theprivate sector
Stops the accumulating debt caused by unfunded pension andretiree benefit liabilities
Reduces unfunded liabilities
Requires pension boards to be more transparent andaccountable
Ends abuses such as salary spiking and retroactive benefitincreasesBelow are summaries of both versions of the initiative proposal:
Government Employee Pension Reform Act of 2012,Version #1
SummaryThe Government Employee Pension Reform Act of 2012,version #1 will stop pension system abuses, reduce the costs anddebts of government employee pensions and give governmentemployees the same type of retirement benefits earned by mostprivate sector employees. The reforms apply to all state and localgovernment 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 unfundedliabilities, so defined contribution plans will be the most likelyoption, though defined benefits and annuities underwritten bythird parties would be allowed.
 The employer and employee would make equal contributions toall benefit costs, up to a 6% of salary cap on employercontributions to non-safety employees and 9% of salary forpublic safety employees.
Employees not participating in Social Security would get areplacement benefit that matches the Social Security paymentthey would otherwise earn, except that full career public safetyemployees would receive their full benefit at age 58.
Death and disability benefits must be provided outside thepension system.
Current Employees
Ends spiking by requiring a three year averaging of agovernment employee’ highest income and excludes from thepension calculation perks such as sick days, vacation days andclothing allowances.
When a government agency’s pension plan is less than 80%funded (or “at-risk”) its contribution to government employeepensions will be capped at 6% of salary for most employees and9% for public safety employees. Government employees notearning Social Security would get a normal cost contributionequal to the cost of the replacement benefit being provided tonew workers. Government employees would have to pick up theremainder of normal cost until their pension fund was no longerat risk, however, in no event will the increased obligation to payfor their pension benefits increase at a rate of more than 3% of their salary in any twelve month period.
Current employees facing higher costs for current benefits areable to agree on lower cost defined benefits or transfer to planbeing offered to new employees.
Death and disability benefits for current employees are notsubject to the cost limitations of this initiative.For All Employees
No retroactive benefits may be granted or payments may bemade.
Employees convicted of felonies pertaining to their public dutiesshall lose the employer contribution value of their retirementplan.
Any annual increase in retiree pension payments cannot exceedthe Cost of Living Adjustment provided for Social Securityrecipients during the same time period.
 The initiative does not impact health care benefits beingprovided to employees and retirees.

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