As more and more employers shift from defined benefit to defined contribution plans, trustees of California Public Employees' Retirement System continue to buck the trend, and highlight the difficulty of converting public plans, according to the Sacramento Bee. .
The board has publicly criticized a proposal by California Assemblyman Keith Richman (R-Northridge), which calls for trimming the pension benefits offered to public employees hired after July 1, 2007, and offering, in exchange, a voluntary 401(k) retirement plan.
"[The Proposal] is playing politics with retirement security of our members," said Nick Smith, who represents state Controller Steve Westly on the CalPERS board. "Our members are not getting rich off of retirement benefits," he said. More than 1.4 million public employees, retirees and their families, as well as 2,500 employers, rely on CalPERS for health and retirement benefits.
Richman criticized the 13-member board for opposing different versions of his proposal for the past two years. "It is astounding to me that they didn't do an actuarial determination of the cost of the proposal," said Richman. "How can they make a decision without adequate information?"
California's existing public employee retirement plan is a traditional pension through which employees are guaranteed benefits based on their tenure and salaries.
Gov. Arnold Schwarzenegger, who cited rising pension costs for rising pension costs for state and local governments, dropped his push to make app retirement plans contributory after criticism from labor unions. His office has criticized the Richman plan.
Republican Strategist Dan Schnur said that because of the political fallout during the governor's election, it is unlikely the question of whether to change the retirement plan will get on the ballot anytime soon.
"It's in no one's best interest to wage a slash-and-burn attack on CalPERS," said Barbara O'Connor, director if the Institute for the Study of Politics and Media at the California State University at Sacramento.
Richman and his supporters say that the state, cities and towns across California owe pensioners about $30 billion, but have no plan to cover the debt.
Meanwhile, plan members could fare better, according to the The Pacific Research Institute, a conservative think tank in San Francisco. By replacing or supplementing the pension plan with a 401(k) program, the group estimated that 120,000 CalPERS members who are under 50 could save twice as much for retirement benefits through a 401(k) plan compared to a traditional pension.
"You can control what you're investing. They can get higher rates of returns," said Anthony Archie, of the Institute.