Pension Reform Nets Savings for CalPERS Employers
June 16, 2016
Communications & Stakeholder Relations
Brad W. Pacheco, Deputy Executive Officer
Wayne Davis, Chief, Office of Public Affairs
Contact: Amy Morgan, Information Officer
Nearly 30 percent of member population accrues benefits under new, lower, benefit formulas
SACRAMENTO, CA - The California Public Employees' Retirement System (CalPERS) Pension & Health Benefits Committee (Committee) released new data that showed employers are saving up to five percent of payroll for members covered by the Pension Reform Act of 2013 (PEPRA). The Committee also reported that employers will see additional cost savings now that nearly 200,000 members are classified under the PEPRA and are accruing lower benefits.
"Lowering costs for our employers and reducing risk in the System is a priority for CalPERS," said Priya Mathur, chair of the CalPERS Pension & Health Benefits Committee. "Our commitment to our members is to ensure that the System continues to be sustainable, secure, and cost-effective."
Cost savings for the state range from 1.2 percent of payroll for miscellaneous plans and up to 5.1 percent of payroll for safety plans, while plans in the schools pool saw an approximately 1.7 percent cost savings as of the June 30, 2015 actuarial valuations. Savings for local public agencies will vary depending on the benefit provisions they elected to provide to their employees and the demographics of their work forces.
Under PEPRA, new member pension benefits are required to be based on a three-year final compensation, members must contribute at least half of the normal pension cost, and they are subject to a lower earnings cap that counts toward their pension. New members are defined by PEPRA as establishing CalPERS membership for the first time either on or after January 1, 2013.
The Committee also reviewed three additional remaining PEPRA implementation steps that will be brought forward for public comment at future Board meetings. These include proposing new draft regulations for pensionable compensation, a new proposed regulation to address the excessive liability statute that is caused when a member receives a significant pay increase from the new employer that the prior employer is responsible for, and a final resolution for transit employees through the outcome of pending appeals or via current legislation, Assembly Bill 1640.
"Moving forward and implementing the remaining pension reform measures aligns our efforts with the true intent of pension reform," said Alan Milligan, CalPERS Chief Actuary. "This early data analysis shows how pension reform is already bending the cost curve."
Pension reform is expected to save employers approximately $29 to $38 billion over the next 30 years.
View the agenda item (PDF) that shows the PEPRA analysis.
Learn more about pension reform impacts.
For more than eight decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 1.8 million members in the CalPERS retirement system and administers benefits for nearly 1.4 million members and their families in our health program, making us the largest defined-benefit public pension in the U.S. CalPERS' total fund market value currently stands at approximately $291 billion. For more information, visit www.calpers.ca.gov.
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