Statewide Pension Reform Efforts in California Since 2010

State Legislation

Statute – AB 340 – Governor Brown’s 12 Point Plan  –  signed by Governor on September 12, 2012
text of AB 340
Key Provisions: For new hires, reduces defined benefit formula and offers “hybrid” plan incorporating a defined benefit and a 401K with a target retirement of 75% of pay (based on a final three year average) with eligibility at age 57 for safety employees and 67 for non-safety employees. For existing hires (and new hires), to contribute 50% of the costs of funding their pension benefit, limits post-retirement government employment, prohibits retroactive benefit increases, prohibits purchase of “air time,” and curtails “spiking.”

State Ballot Initiatives

Constitutional Amendment  –  filed October 15, 2013  –  Approved for circulation, title & summary in dispute
Pension Reform Act of 2014  –  text, official title & summary
Proponent: Chuck Reed
Key Provisions: Amends the California Constitution to clarify the scope of “vested contractual rights,” as follows: to the extent any government employer confers its current employees with vested contractual rights to pension or retiree healthcare benefits of any kind, such rights shall be earned and vested incrementally, only as the recipient employee actually performs work, and only in proportion to the work performed. Empowers public employers – through action by a legislative body or ballot measure to modify the amount employees are required to pay for pension or retiree healthcare benefits. In the event a pension fund or retiree healthcare fund is deemed to be “substantially underfunded,” empowers a government employer to (i) Reduce the rate of accrual for pension or retiree healthcare benefits to be earned in the future. (ii) Reduce the rate of cost of living adjustments for pension or retiree healthcare benefits to be made in the future. (iii) Increase the retirement age for payment of pension or retiree healthcare benefits to be earned in the future. (iv) Require employees to pay a larger share of the cost of pension or retiree healthcare benefits. (v) Other reductions or modifications of pension or retiree healthcare benefits agreed upon during collective bargaining – however, if a government employer takes any of these actions, such actions shall apply only to work performed by employees after the date on which the government employer takes such actions.

Constitutional Amendment  –  filed November 15, 2011  –  Failed to qualify for ballot
Government Employee Pension Reform Act of 2012 (ver. 1)  –  text, official title & summary
Proponent: Dan Pellissier
Key Provisions: For new hires, removes government obligation to pay unfunded pension liability, requires employees to pay at least 50% of required pension contribution, prohibits employer from covering employee portion of contribution, limits government pension contribution to 6.0% of non-safety employee pay and 9.0% safety employee pay, plus an equivalent amount (approx. another 6.0%) to create an additional supplemental retirement benefit that matches social security “as precisely as possible.” For existing hires, changes base wage for calcuating pension benefits to a three year average, and implements emergency changes to pension benefits if pension is deemed to be less than 80% funded, as follows: limits employer contribution to 6.0% of payroll for non-safety and 9.0% for safety. Adds additional employer contribution (approx. another 6.0%) to match what an employer would be required to contribute to social security. Requires employee to contribute balance of necessary funding required to restore solvency to pension fund. Offers employee option to participate in new benefit as defined for new hires if they don’t want to increase their pension contributions.

Constitutional Amendment  –  filed November 15, 2011  –  Failed to qualify for ballot
Government Employee Pension Reform Act of 2012 (ver. 2)  –  text, official title & summary
Proponent: Dan Pellissier
Key Provisions: Reduces pension benefits for current and future public employees, including teachers, nurses, and peace officers, but excluding judges. Eliminates constitutional protections for current and future public employees’ vested pension benefits. Creates hybrid pension plan for new employees, capping collective benefits at 75 percent of salary. Limits cost-of-living adjustments for retired and current employees. Prohibits public retirement systems from providing death or disability benefits to future employees. Requires that current employees add up to three percent of their salary to their pension contribution annually, when pension plan is underfunded.

Statute  –  filed July 12, 2011  –  Failed to qualify for ballot
Tax Public Pensions Above $100,000 Act  –  text, official title and summary
Proponent: Lanny Ebenstein
Key Provisions: Increases income tax rate by 15% for annual pension income between $100,000 and $149,999, and 25% for annual pension income over $150,000, on income received by teachers, nurses, police officers, firefighters, and other public employees from the California Public Employees’ Retirement System and the California State Teachers’ Retirement System.

Statute  –  filed July 12, 2011  –  Failed to qualify for ballot
Raise Public Retirement Ages Act  –  text, official title and summary
Proponent: Lanny Ebenstein
Key Provisions: Increases the minimum retirement age to 65 (or 58 for sworn public safety officers) for members of the California Public Employees’ Retirement System and the California State Teachers’ Retirement System, including for teachers, nurses, police officers, firefighters, and other public employees.

Statute  –  filed July 11, 2011  –  Failed to qualify for ballot
Pension Solvency Act  –  text, official title and summary
Proponent: Ted Costa
Key Provisions: Reduces pension benefits for current and future public employees. including teachers, nurses, and peace officers. For two years, and beyond if system pension obligations are underfunded. changes the minimum retirement age and further reduces annual pension amount received. Restricts the availability of defined contribution plans including 40J(k) plans for public employees. Creates a new state retirement system for private sector employees. Requires audits of pension systems. Caps base pay for new employees and employees in underfunded systems.

Constitutional Amendment  –  filed November 5, 2009 – Failed to qualify for ballot
New Public Employees Benefits Reform Act  –  text, official title and summary
Proponent: Marcia Fritz
Key Provisions: For new hires, reduces pension and retirement health care benefits, increases minimum retirement age, restricts early retirement, increases minimum age and years of employment needed for retirement health care benefits, and limits post-retirement pension increases. For current and new public employees, prohibits retroactive increases in retirement benefits and requires public employers to make annual payments for future benefit costs. Allows public employers to adjust retirement contribution rates for new employees in future labor agreements.