CalPERS Responds to Pension Reform Proposal

May 12, 2011 ( – The California Public Employees Retirement System (CalPERS) says a preliminary review of a pension reform proposal by the California Foundation for Fiscal Responsibility raises serious concerns.

Specifically, CalPERS opposed the suggestions in CFFR’s Alternative A proposal to eliminate health benefits for spouses and dependents of retirees when a retiree turns 65 and that retirees be in an exclusive risk pool (see Non-Profit Proposes CA Public Retirement System Revamp).   

CalPERS said eliminating health care coverage for a retiree’s spouse and dependents places a higher financial burden on retirees, many of whom have fixed incomes. It leaves dependents to try to seek health care coverage through the individual insurance market, fails to address the distinct possibility that they will be unable to secure coverage at all, and fails to consider the resulting societal costs should individuals fail to secure private health insurance and be forced to enroll in public social service and health programs.   

In addition, the current CalPERS pool spreads the risk and the costs over all ages of members in the pool. The proposal to set up a retiree risk pool, separate from active workers, would result in much higher costs for retirees to bear, further increasing their financial burden.   

CalPERS also reviewed the CFFR’s report, “Comparing Public and Private Employee Compensation and Retirement Benefits in California,” and said the study is based on artificial models and doesn’t use real data; prescribing a discount rate of 6% while assuming investments earn 7.25% is inherently inconsistent and result oriented; and the study falls short on specifics and lacks comparative data.