$459 million more for CA pension fund
This may seem boring but everyone needs to get up to speed on the financial health of the pension plan you have been promised when you retire.
The largest pension system in the country, the California Public Employees Retirement System or CalPERS for short, approved a major rate hike to $459 million, to replenish state worker pension funds that remain low, even though the stock market has rebounded from a post-crash low five years ago.
The first of three rate hikes to cover the expected longer lives of retirees (2 years added for men, 1½ years for women) will push the state payment to CalPERS to an estimated $4.3 billion in the new fiscal year beginning next July.
CalPERS has been using an unusual “smoothing” method that spreads gains and losses over 15 years and a “rolling amortization” that refinances debt each year. The new “direct” actuarial method is intended to reach full funding in 30 years. The system serves three groups: state workers, non-teaching school employees and 1,581 local governments, ranging from large cities like Long Beach to small special districts with a handful of employees.
Former Gov. Pete Wilson cut pensions and used “surplus” CalPERS funds to help balance the budget. Unions called it a “raid,” prevailed in court and backed an initiative, Proposition 162 in 1992, giving the CalPERS board sole control of pension funds.
Former Gov. Gray Davis signed landmark legislation, SB 400 in 1999, that restored the Wilson pension cuts and increased benefits (notably for the trend-setting California Highway Patrol) to a level that critics say are “unsustainable.”
As former Gov. Arnold Schwarzenegger in 2005 briefly backed a proposal to switch new hires from pensions to 401(k)-style plans, citing steep hikes in pension rates, CalPERS adopted the radical smoothing policy to avoid future rate “shocks.”
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