2/17/2005
20
Comments/Notes on Pension Reform
Pensions & Investments, 1/10/05
¥All public defined benefit plans in the state would be closed to new employees [starting 7/1/2007] although existing employees could continue to participate. It also would transform every public fund in California run by a state agency Ñ including cities, counties, utility districts and possibly the $39 billion University of California Retirement Plan [into defined contribution plans].
¥The governor favors Mr. RichmanÕs proposal, which, under a new revision, would cap employer contributions between 6% or 9% of pay for most government employees. [6% for almost all CSU employees]
¥According to the CalPERS data, administrative costs of defined contribution plans are typically 1-2% of assets, vs. 0.18% for CalPERS, the nationÕs largest defined benefit plan.
¥CalPERSÕ research also shows that 80 cents of each $1 in a defined benefit plan is paid out in benefits, vs. 50 cents in a defined contribution plan. For benefit payments to be the same, contributions would have to increase substantially, according to the National Conference on Public Employee Retirement Systems, Washington.