California Gov. Jerry Brown will propose on Thursday changes to public pension benefits in an effort to save the state about $900 million annually.
The proposal will include a mandatory “hybrid” system that would have future retirees getting their retirement from a guaranteed benefit and a 401(k)-style plan that would go up or down based on market actions. For employees who have at least 30 years of service, retirement benefits would aim to replace about 75 percent of an employee’s salary through retirement funds and Social Security.
“It’s time to fix our pension systems so that they are fair and sustainable over a long time horizon,” Brown said in a statement. “My plan raises the retirement age and bans abusive practices like ‘spiking’ and ‘air time’ while mandating that public employees pay an equal share of pension costs.”
His plan also would require new employees to work at least 15 years before they can get any state-funded retiree health care. Once the retirees become eligible for Medicare, the state would pay only the premiums for the program instead of paying more benefits like what is done now. Under Brown’s proposal public employees also would have to contribute at least half the annual cost of funding their pension benefits, which differs from the current pension plan where some employees already pay that much but others pay little or nothing – something that leaves taxpayers paying for their benefits.
Before the changes can be enacted, though, Brown must first get approval from the state Legislature. There, he will more than likely meet resistance from members of his own party as Democrats are not as eager to change pension plans that could seem harmful to unions and workers.
Several parts of the governor’s plan also would have to get voter approval before becoming law, including extending many of its provisions to employees at California’s public university system and adding two, independent public members to the board of the California Public Employee Retirement System, the nation’s biggest public pension fund. Like Democratic opposition the governor is likely to face, union members also are expected to be opposed to his plans.
“The governor has indicated that labor will not like many of his proposals,” Dave Low, chairman of the union-backed group Californians for Retirement Security, said in a written statement. “He is right. Many of the governor’s proposals circumvent collective bargaining. Unions across California have negotiated major retirement concessions, including increased payments by employees and two-tier benefits. These concessions have already saved the state, cities, counties and other entities hundreds of millions of dollars.”
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