CA Lawmaker Introduces Bill to Impose Pension Cap

January 7, 2011 (PLANSPONSOR.com) - A California state lawmaker has introduced a bill to prevent all public employees from gaining dramatically increased pension benefits.

The San Francisco Chronicle reports that Assemblyman Jerry Hill’s AB89 would require all public retirement programs in California, including University of California’s, to adhere to the Internal Revenue Service (IRS) cap when calculating benefits for employees who join the retirement system after January 1, 2012. Hill introduced the bill after UC executives, some of whom earn more than $700,000 a year, demanded their pensions be calculated as a percentage of their full salary, not just the first $245,000, the cap imposed by the IRS.  

According to the news report, the IRS granted UC a waiver on the cap in 2007, and the executives say UC is required to hand over the bigger pensions – retroactive to 2007 – because the regents voted in 1999 to do so once the IRS approved.  

However, UC, which is trying to close a $21 billion gap in unfunded retirement obligations, says lifting the cap is too expensive.  

The news report said Hill called it “outrageous and irresponsible” that 200 well-paid UC executives would gain tens of thousands of dollars a year in retirement income – more than $100,000 in some cases – by lifting the cap. He noted that state lawmakers generally cannot tell the autonomous public university what to do, but state laws can apply to UC if they are also aimed at other public agencies and not UC alone.

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