Proposal for Pension Benefit Changes Could Be Illegal, CalPERS Says
The plan, by former San Jose Mayor Chuck Reed (D) and former San Diego council member Carl DeMaio (R), would require California to put any proposed pension and retirement benefit changes to a public vote.
Under the proposal, which seeks to cut rising retirement costs, "defined-contribution" plans would become the default retirement program for state and local employees hired after Jan. 1, 2019. Employers would need voter approval to add new workers to "defined-benefit" plans, which currently are common for government employees.
In addition, the plan would prevent:
- Government employers from paying more than 50% of retirement benefits without voter approval; and
- Lawmakers and government agencies from filing lawsuits or pursuing other actions to interfere with voter-approved ballot measures related to state employee compensation or retirement benefits.
The plan would not modify death or disability benefits.
In a letter sent to California Attorney General Kamala Harris (D) last week, legislative analyst Mac Taylor said the effects of the plan are unclear. Harris has until Aug. 11 to issue a title and summary of the measure (California Healthline, 7/30).
Details of Letter
In a letter to Assembly member Rob Bonta (D-Oakland), Stausboll wrote that while the ballot measure aims to reduce benefits for new hires, it could potentially threaten benefits for existing workers. She said that would violate the "California rule," which stipulates that workers' benefits cannot be cut after they have been hired (Reuters, 8/4).
Stausboll also noted that the plan could:
- Cause chaos by requiring employers to close their defined benefit programs to workers hired in 2019 and after;
- Make providing death and disability benefits "extremely impracticable"; and
- Threaten CalPERS' federal tax-exempt status (Ortiz, "The State Worker," Sacramento Bee, 8/4).
In response to Stausboll's letter, Reed said, "CalPERS is largely responsible for the trouble we are in now and they are quite happy with the status quo," adding, "They are not exactly an impartial party. I'm not surprised they would find fault with our initiative" (Reuters, 8/4).
Meanwhile, DeMaio said the letter is "a lie, smoke and mirrors from a failed public pension system determined to preserve the status quo." He added, "CalPERS is out for its own survival, even at taxpayers' expense."
However, Stausboll in a statement said, "The assertions in the letter are based on well-accepted current law and fact" ("The State Worker," Sacramento Bee, 8/4).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.