CalPERS Committee Proposes Policy Change to Lower Pension Costs

August 19, 2010 ( - A key committee of the California Public Employees’ Retirement System (CalPERS) has approved a staff recommendation that would change the pension fund’s policies to immediately recognize benefit changes.

A CalPERS news release said the shift in policy, requested by the employer and some unions, could save the State’s General Fund budget up to $500 million this fiscal year if the Governor and Legislature enact higher contributions for existing members and new hires. The recommendation now goes to the full CalPERS Board of Administration for a vote on Thursday.  

Specifically, according to the agenda for members of the benefit and program administration committee, the recommendation is that the Board approve the adoption of a policy that authorizes changes in retirement benefits and member contribution rates to be reflected in the employer contribution rates for the State plans immediately upon the effective date of the changes or as soon thereafter as can be accomplished given the Board’s meeting schedule.  

The agenda explained that CalPERS’ practice for the State plans has been to recognize benefit changes in the first actuarial valuation following the effective date of the benefit changes. If the current practice were to remain in place, the State would not realize savings from the tentative labor agreements that include lower retirement benefits for new hires and higher member contribution rates for all existing members and new hires, assuming they are ratified and adopted, until the 2012-2013 fiscal year.  

According to the committee, best practice would be to recognize all changes in plan provisions as soon as practical. By doing so, plan funding responds promptly to changes in benefits and member contribution levels.