Report Analyzes Proposals To Reduce State Worker Pensions
Two proposals under consideration could reduce pension benefits for hundreds of thousands of state workers by up to 40%, according to an analysis scheduled to be released today by the California Foundation for Fiscal Responsibility, the Los Angeles Times reports.
California's Pension Situation
Last year, California's five largest pension funds had enough money to fund only 61% to 74% of their obligations to current employees, according to the study.
Unless the state significantly scales back its pension program, its retirement obligations will rise sharply over the next 10 years, researchers found.
The foundation warned that escalating costs for public workers' pensions and retirement health benefits could overwhelm the state's ability to fund many basic health, public safety and welfare programs.
Details of Pension Proposals
For its report, the foundation analyzed two major proposals that would reduce state pension payouts by about 40% for current workers and by about 25% for people hired after 2011.
The first proposal is based on the federal government's retirement system and is similar to a plan backed by the Little Hoover Commission. The commissionÂ recently endorsed a pension plan that would:
- Offer a small fixed payment and Social Security benefits every month;
- Provide a savings plan similar to a 401(k) with some employer matching; and
- Reduce health care benefits for early retirees.
The second proposal is expected to be the framework for aÂ plan that could go before the Secretary of State this month. The proposal is a version of a 401(k) plan that would:
- Cap employer matching contributions at 9% of salary; and
- Provide additional benefits to teachers (Lifsher, Los Angeles Times, 5/5).
Bill Aims To Limit 'Pension Spiking'
In related news, the Assembly Public Employees, Retirement and Social Security Committee recently passed a bill (AB 340) that would prohibit certain so-called "pension spiking" practices.
Committee Chair Warren Furutani (D-Lakewood) authored the measure, which aims to prevent public workers from using various maneuvers to improperly boost their pensions (Herdt, Ventura County Star, 5/4).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.