CalPERS Board Votes To Phase In Rate Hike Beginning This Year
On Tuesday, the CalPERS board voted 7-4 to immediately begin phasing in higher retiree contribution rates to account for the costs associated with longer life spans, the Sacramento Bee reports (Kasler, Sacramento Bee, 2/18).
In December 2013, CalPERS staff members recommended considering new demographics when setting contribution rates for fiscal year 2016-2017.
Earlier this month, Gov. Jerry Brown (D) sent a letter to the CalPERS board urging members to immediately account for retirees' longer life expectancies and phase in over three years the costs associating with the longer life spans.
However, CalPERS staff members issued a report urging the pension fund's board to raise contribution rates beginning in FY 2016-2017 and to phase in the increases over five years (California Healthline, 2/13).
Details of Board's Decision
The contribution rate increase is set to begin July 1 and will be phased in over three years. The move is expected to cost the California treasury $400 million.
According to the Bee, the change will cost the state an additional $1.2 billion annually beginning in July 2016. Under the plan, the state's annual contribution to CalPERS will increase to $5 billion (Sacramento Bee, 2/18).
However, higher rates for school districts and local governments will not be phased in until mid-2016, according to Reuters.
In a statement, the CalPERS board said, "While today's action will result in higher pension costs for the state and ... contracting employers, it helps to stabilize pension costs over time and puts CalPERS on a path to meet the pension obligations promised to current and future public employees."
In a release, Brown applauded the board's decision, saying, "The Board today took important and responsible action to strengthen California's pension system" (Reid, Reuters, 2/18).
However, CalPERS board member J.J. Jelincic said the board should have allocated funding towards CalSTRS -- the state's pension fund for teachers -- because its financial situation "is in far worse shape" than CalPERS' (Sacramento Bee, 2/18).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.