What is CalPERS? We explain in one minute
Nearly 200 Southern California retirees who lost a share of their pensions last year didn’t know their retirement income was at risk until it was too late.
By the time they heard from CalPERS, their former employer had long since quit paying its bills and set up an inevitable decision for the pension fund to cut their benefits.
A new bill Gov. Jerry Brown signed last week aims to at least ensure that public workers and retirees have some time to protest if their former employer moves to break from the California Public Employees’ Retirement System in a way that would jeopardize their incomes.
It was one of several bills Brown signed in his final legislative session that don’t solve the state’s public pension crisis but provide some protection for retirees and a new saving mechanism for local governments to manage their long-term CalPERS costs.
The new pension laws, which take effect on Jan. 1, are:
- Senate Bill 1022 by Sen. Richard Pan, D-Sacramento, requires government agencies to notify their workers and retirees if they’re taking steps to quit CalPERS within 30 days of adopting a resolution to begin the termination process. The law gives workers and retirees time to lobby their employer to stay in the fund or to make a separation payment that would ensure they receive full pensions.
- Assembly Bill 1912 by Sen. Freddie Rodriguez, D-Pomona, prohibits local governments from dissolving so-called joint powers authorities unless they commit to funding their full pension obligations.
- Senate Bill 1413 by Sen. Jim Nielsen, R-Gerber, allows government agencies to create pension “pre-funding” accounts that would help them smooth out sudden increases in CalPERS bills or cope with a decrease in their own revenue.
The bills by Pan and Rodriguez were shaped by a CalPERS decision in March 2017 to reduce the pensions it owed to 197 former employee of the East San Gabriel Valley Human Services Consortium.
The organization was a joint powers authority established by four cities in 1979 to provide job-training services. It folded in 2014 when it lost its contract with Los Angeles County.
Normally, agencies that quit CalPERS make a hefty separation payment that the pension fund uses to pay the full benefits promised to former workers.
The East San Gabriel organization simply stopped paying its bills without telling its former employees. A year and a half later, CalPERS reduced the value of their pensions based on a formula that accounted for how much money they and their employer had paid into the fund.
The four cities that created the agency declined to pick up the bill.
Pan’s bill ensures that workers in a similar situation would have time to lobby their employer and CalPERS. Rodriguez’s prevents cities from abandoning workers they indirectly hire through joint powers authorities.
“In these situations, there’s impending disaster that the employees don’t even know about,” said Terry Brennand, a senior lobbyist for Service Employees International Union who oversees retirement issues.
Cities, counties, school districts and the California Special Districts Association pushed for Nielsen’s bill.
All local governments are adjusting to higher CalPERS rates, but some are in a better position than others and want to use unexpected revenue they receive to prepare for future pension obligations.
The new law allow allows them to set money in a separate, CalPERS-managed trust to prepay money they owe for retirement benefits. They can draw on the money to pay their CalPERS bills in the future.