April 8, 2014

Two new research studies analyze the various effects of pension reform on public employee compensation and compare California’s retirement benefits to the nation.

The first study, California Public Employee Retirement Benefits - Assessing Compensation Changes (PDF) found a $435 less per month difference in retirement income when comparing hypothetical new CalPERS members to members hired before pension reform went into effect. The study also estimates that California government employers spent 0.06 percent less on overall compensation compared to the national average in 2010 and 0.30 percent more on retirement benefits. State and local government compensation spending was compared across all states and the District of Columbia with a focus on salaries, defined benefit plans and Social Security benefits. The study did not review health insurance benefits.

These overall compensation figures will change as most new government employees will have reduced benefits under the Public Employees’ Pension Reform Act of 2013 and some employees are required to contribute more to their defined benefit plan normal cost.

The Emerging Role of Defined Contribution Plans for California Public Employees (PDF) study finds that given specific hypothetical assumptions, new CalPERS members need to save between $373 and $1,480 per month more or work 2.5 to 5 years longer to retire with the same income as CalPERS members who were hired before the pension reform act went into effect. The study demonstrates that with careful retirement planning and the use of a Defined Contribution (DC) plan, new members can achieve the same retirement results as members that were hired before January 1, 2013. A DC plan is an additional savings vehicle that allows employees to supplement their pension.