Calif. Governor Puts Forth New Pension Proposal

August 29, 2012 ( – California Governor Jerry Brown has announced a compromise pension reform plan that eliminates some labor-sensitive changes.

By Rebecca Moore | August 29, 2012

The new proposal does not include putting new government workers in a hybrid system that includes a 401(k)-style plan, greater independence for the board that oversees the state's main pension fund or a reduction in retiree health care costs, the Associated Press reports. The changes that will save the most money apply primarily to new workers, rather than existing ones.  

According to the AP, the reforms include a cap for annual pension payments for new employees at $110,100 for most workers and $132,120 for employees not covered by Social Security, such as teachers and some public safety workers. They also require new employees to contribute at least half of their pension costs.  

The proposal would also raise the minimum retirement ages for new employees. A civil service worker would have to work until age 67, rather than 55, to receive full benefits. For public safety workers, that goes from age 50 to 57, and the maximum benefit formula would be reduced.  

The proposal would also end some abuses of the pension system, including a practice known as "spiking" in which employees are given big raises during their last year of employment as a way to inflate their pensions.  

A legislative committee passed the bill earlier this week, setting up a full vote by lawmakers Friday.  

Brown's original plan was projected to save $4 billion to $11 billion over 30 years. The governor said the changes, if enacted by the Legislature, would save $30 billion, although the time period for that savings was not clear.