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Legislation Exempts Some CA Public Employees from Pension Rollbacks

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Three months ago, legislators in California passed public pension rollbacks. Public employees in the state have heavily denounced the legislation, claiming that they would bring the issue before voters, or go to the courts to overturn what they view as negative aspects of the plan.

Governor Jerry Brown signed the California Public Employees’ Pension Reform Act (PEPRA) on September 12, 2012. Previously, the state fell under the County Employee Retirement Law (CERL) of 1937.

PEPRA aims to reform public employee pensions through provisions affecting benefit formulas, defining what comprises pensionable earnings, and limits on those earnings, as well as many other stipulations.

According to Dave Low, chairman of Californians for Retirement Security, which represents 1.5 million public employees and retirees, the plan entails the largest pension rollback in California history. As seen throughout the state’s history, this is a struggle between organized labor and legislative bodies.

Sponsored by the Teamsters and two other unions, the bill excludes 20,000 local and mass transit workers from higher pension contributions and overall retirement benefits.

Another related piece of legislation, Assembly Bill 160, introduced by Senator Luis Alejo (D-Watsonville), assumes public pension rollbacks violate mass-transit federal grants. According to LegTrack, AB 160 would accept certain multi-employer plans authorized under federal law and retirement plans for public transit employees.

A press release from Senator Alejo’s office stated the bill will secure approximately $2 billion in annual transit funding. Also, it may save millions of dollars in liabilities, through the restoration of collective bargaining rights for union transit employees and aligning PEPRA with federal law.

Not only will union mass-transit employees benefit from the bill, but also a small percentage of non-transit public employees who are in private sector Taft-Hartley pension plans.

Alejo’s press release further claims that PEPRA has violated the terms of the “protective arrangement” between these transit unions and the state of California. Since the passage of PEPRA, numerous objections have been filed with the US Department of labor.

The California Public Employees’ Retirement system (CalPERS) held more than $242 billion in assets as of June 30, 2011. CalPERS administers pension benefits for state employees, twenty-six counties in the state, and more than 1,500 political subdivisions, which include school districts.

Currently, the pension plan requires that all state and local employees pay at least half the normal cost of their pensions. Employees that were hired after January 1, however, will see a cap on their pensionable pay, and will receive less than sustainable benefits.

Public employee pension plans have remained an issue in southern California — San Diego specifically — for quite some time. The fact that new union employees will have to forgo a great deal of their collective bargaining rights, as well as work longer than other employees to reach retirement, should be solved with AB 160.

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