Politics

Details of Gov. Brown's pension overhaul proposal

Thursday, October 27, 2011
California Governor Jerry Brown

Gov. Jerry Brown, a Democrat, is unveiling his proposal to overhaul California's public employee pensions Thursday. Here are highlights of the plan, according to a draft report obtained by The Associated Press:

  • Require all new and current employees to contribute at least 50 percent of their retirement costs, shifting the burden from public employers, some of whom currently make the entire contribution. This portion of the proposal would be phased in. Employers and employees would be barred from suspending contributions.



  • Form a mandatory "hybrid" risk-sharing pension plan for new employees. New plan would include a reduced, guaranteed defined benefit, a defined contribution portion such as a 401(k)-style plan, and Social Security. The goal would be to replace 75 percent of an employee's salary, based on a 30-year career for public safety employees, or 35 years for non-public safety employees.

  • Raise retirement age from 55 to 67 for new, non-public safety employees. Raise the retirement age beyond the current 50 years for newly hired public safety employees, to an age based on their ability to perform the job and maintain public safety.

  • For new employees, calculate pension benefits based on the highest average annual compensation for three years, rather than the current one-year system. Benefits would be calculated based on regular, recurring pay and would not include special bonuses, unused vacation time or overtime.

  • Bar all employees from buying service credits known as air time, to boost retirement service credit for time not actually worked.

  • Add two independent, public members with financial expertise to the board of the California Public Employee Retirement System board. Replace the State Personnel Board representative on that board with the director of the California Department of Finance. Brown also will recommend that other public retirement boards make similar changes.

  • Prohibit retroactive pension increases based on earlier retirement or higher benefit levels for all employees.

  • Require new state employees to work for 15 years to become eligible for any state-funded health care premiums and 25 years to qualify for the maximum state contribution to those premiums. State-provided retiree health care premium coverage would end at Medicare eligibility age, when the state would fund only Medicare premium coverage and limited "wrap-around" health care benefits.
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PRESS RELEASE

Governor Brown Unveils Pension Reform Plan

12-point proposal raises retirement age for public employees, ends system-wide abuses and cuts costs for taxpayers by billions SACRAMENTO -- Governor Edmund G. Brown Jr. today proposed 12 major reforms for state and local pension systems that would end system-wide abuses and reduce taxpayer costs by billions of dollars over the long term.

"It's time to fix our pension systems so that they are fair and sustainable over a long time horizon," said Governor Brown. "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."

The Governor's 12-point plan addresses key issues affecting pensions in state and local governments. He initially outlined a pension reform plan during budget negotiations in March 2011.

When fully implemented, these reforms will cut roughly in half the cost to taxpayers for providing pension benefits for state employees. It will cut the risk to taxpayers for pension debt by more than half. Similar savings are expected across all systems.

"I look forward to working with the legislature to enact these major reforms," said Governor Brown.

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