Average "Full Career" CalPERS Retirement Package Worth $70,000 Per Year

“‘What makes the ‘$100,000 Club’ some magic number denoting abuse other than the claims of anti-pension zealots?’ said Dave Low, chairman of Californians for Retirement Security, a coalition of 1.6 million public workers and retirees.”

This quote from a government union spokesperson, and others, were dutifully collected as part of Orange County Register reporter Teri Sforza’s eminently balanced reporting on the latest pension data, in her August 8th article entitled “The ‘100K Club’ – public retirees with pensions over $100,000 – are a growing group.”

In the article, Sforza’s team evaluated data released by Transparent California on 2015 CalPERS pensions, and reported the number of pensioners receiving $100,000 or more per year was 3.5% of total retirees, up from 2.9% in 2013. That truly does seem like a low percentage, but it ignores two key factors, (1) the total retiree pool includes people who only worked a few years and barely vested a pension, and (2) the total retiree pool includes people who worked many decades, sometimes 30 or 40 years or more, but they only worked part-time during their lengthy careers.

So if you restrict your pool of participants to those who worked a full career, and retired within the last 10 years, what percentage of those retirees would belong to the $100,000 club? As it turns out, there are 75,279 CalPERS retirees who worked more than 25 years and less than 35 years, retiring after 2006. And as it turns out, 9,763 of them, or 13%, are receiving pensions in excess of $100,000 per year.

Moreover, CalPERS doesn’t report the value of retirement health benefits and other retirement benefits, which almost certainly exceed $10,000 per year. If you make this reasonable assumption, you now have 14,901 CalPERS retirees, or 19% of our 75,279 pool of full career retirees, receiving a retirement package worth over $100,000 per year. Worth noting – we didn’t have the data necessary to screen the part-timers out of this pool. If we did, the numbers would be higher.

So if you use the appropriate denominator, the “$100 Club” isn’t 3.5% of the pie, it’s 19%, but so what? It’s still not a very big slice. Here’s where the flip-side of “full career pension” comes into play. Most people don’t work 25-35 years in public service. But most of them do vest their pension benefits, which can be vested in as little as five years. What happens when someone quits after five years, and only goes on to collect, say, a $20,000 per year pension? Someone else is hired, they work five years, and they also qualify to eventually collect a $20,000 per year pension. Then someone else, and then someone else – until you have three or four (or more) people who are all going to receive a $20,000 per year pension – for a job that one person could have performed if they’d stayed with the agency for a full career.

This is a critical point to understand. The significance of “full career” pensions is this: The taxpayer will fund pensions at that level of generosity, even if the benefit is split among multiple partial career participants – people who presumably worked elsewhere (where they also saved for retirement) during the majority of their careers. Should you expect a $100,000 per year pension if you only worked for five years? Of course not. But that’s what taxpayers are funding – whether it goes to one person, or to five people who worked a few years each to collectively fill one person’s full-career position in government.

This is why, when you are considering whether or not pensions are fair and affordable, the full career average pension is the only relevant measure. So what is the full career average?

For CalPERS in 2015, participants with between 25 and 34 years of work who retired in the last ten years, on average, received a pension of $60,277.  Add to that the value of their retirement health benefits and other retirement benefits and the average was probably closer to $70,000 per year.

Just for comparison, for Orange County (OCERS) retirees in 2015, participants with between 25 and 34 years of work who retired in the last ten years, on average, received a pension of $73,628.  Add to that the value of their retirement health benefits and other retirement benefits – information which OCERS also refuses to provide – and the average was probably over $80,000 per year. As for the OCERS “$100,000 Club”? Within the pool of full career retirees as described, and accounting for retirement health benefits, 31% of them were members. Nearly one in three.

Public sector spokespersons frequently point out that public employees don’t get Social Security. Actually, about half of them do get Social Security, but never mind that detail. Because the maximum Social Security benefit, which one must wait until they are 68 years old to receive, is a whopping $31,668 per year.

Calling critics of this double standard “anti-pension zealots” is lazy rhetoric. The problem with defined benefits is not that they exist. The problem is that we have set up a system where public employees operate under a set of retirement benefit formulas and incentives that are roughly four times better than what private sector workers can expect. Yet these private sector workers pay the taxes to fund these pensions and bail them out when the investment returns falter.

 *   *   *

Ed Ring is the president of the California Policy Center.

13 replies
  1. Avatar
    Tough Love says:

    Re your last paragraph ….. and specifically the “four times”.

    Yup, I’ve been saying that for years.
    And P.S. in California it’s closer to six times for Safety workers.

  2. Avatar
    TDS says:

    Yup, Tough Love has been saying that for years.

    And Juvenal, among others, has been saying for years that to compare pensions alone, outside the context of total compensation, is worthless.

    The major studies have all (but one) concurred that even with the higher pensions, average total compensation for equivalent workers is roughly equal in the public and private sectors.

    And all those studies (including “but one”) are based on data six to ten years old. Six to ten years in which there have been reductions in benefit formulas for most states and local governments. Six to ten years in which employee contributions to pensions have increased. Six to ten years in which wage increases for the private sector have exceeded those in the public sector.

  3. Avatar
    RAJ says:

    In order to get a pension of $20,000 after five years of service, the person must have been earning more than $125,000 in salary. (Remember, only base salary counts toward pension calculations. No overtime, unused vacation, or other benefits, just salary.) The only people making that kind of money are upper management, political appointees, and executive directors.

    The average pension for those with five or fewer years of service who retired in the 2014-15 fiscal year was $634 per month or $7,608 per year. For those with five to ten years of service, the pension was $1,034 per month or $12,408 per year.

  4. Avatar
    Tough Love says:

    Quoting TDS” …… to compare pensions alone, outside the context of total compensation, is worthless. ”

    You sound like S. Moderation Douglas’s twin …. is that you ?

    I have (MANY times) stated that Public/Private Sector “Total Compensation” (wages + pensions + benefits) should be very close in jobs with comparable risks and requiring similar experience, skills, and knowledge.

    I stand by what I stated above (and which Ed Ring agrees from this article) that pensions and benefits are far far greater in “value at retirement” * than those granted Private Sector workers by their employers …. and certainly in the order of 4 times (6 times for safety workers). And that excess, being formula/provision driven, applies across the board, from the lowest to the highest paid workers.

    Studies do indicate that (as a group) Public Sector workers with PHD’s or with Professional designations (e.g., MD) get lower “wages” in the Public Sector, and depending on the size of that shortfall, their far far greater pensions & benefits may or may not fully (or more than fully) erase that differential.

    However the PHD/Professional group is less than 10% of Public Sector workers (and being compared to less than 5% of all Private Sector workers). The 90+% Public Sector reminder make similar (or MORE) in cash wages ….. along with their far far greater pensions & benefits.

    Harping on that small (PHD/Professional) segment is your way of finding a point to distract from the real problem, that being that the FINANCIAL IMPACT on taxpayers is the total impact from ALL (yes all) workers combined.

    Public Sector excess “Total Compensation” is unnecessary, unjust, unfair to Taxpayers, clearly unaffordable, and drowning Cities and States throughout America.

  5. Avatar
    S Moderation Douglas says:

    “According to a new study by the Cato Institute, Federal workers’ pay and benefits were

    78 percent higher than private employees, who earned an average of $52,688 less than

    public sector workers last year.”

    WRONG! Classic apples to oranges comparison. Totally discredited.

    ” Adding on top of that their overly generous pensions and

    medical benefits, the total anticipated cost of a single public employee runs into the

    millions and tens of millions for the highest paid.”

    WRONG AGAIN! The pensions and medical benefits are already factored into the “78 percent higher”, “not added on top” and, to reiterate, the 78 percent is wrong to begin with.

    “The Federal government will no longer be able to “borrow” funds from Social Security

    with IOU’s.”

    That’s the ONLY place they can be invested.

    “By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are “special issues” of the United States Treasury. Such securities are available only to the trust funds.”

    Social Security trust fund FAQs

    What we have here is a threefer … Lose, lose, lose

  6. Avatar
    Tough Love says:

    Continuing from above ……

    * Value at Retirement encompasses not just the pension “formula” (specifically, the per-year-of-service formula-factor), but also the generosity of the Plan’s “provisions”, such as the youngest age at which full/unreduced pensions can commence, the existence of COLA-increases), the extent of early retirement subsidies, and the ease of obtaining a more costly “Disability” retirement.

  7. Avatar
    SeeSaw says:

    I know people with 20-year careers who only get $5,000/year pensions and I also know people with five-year careers who only get $2,000-$5,000 yr. pensions. For you, author, to insinuate that any public employee is going to retire after a five-year career with a $20,000 pension is outrageous! They would have to be making $100K+ per year, base salary, in the first place–must be at least 50 years old. What were “they” doing for the other 20 years of their working lives!!!!

  8. Avatar
    S Moderation Douglas says:

    My ears wuz burnin’!

    I had a brother, but alas, no twin.

    I agree with what you stated above (and which Ed Ring agrees from this article) that pensions and benefits are far far greater in “value at retirement” * than those granted Private Sector workers by their employers ….

    I also agree with TDS that pensions are only one side of the equation. Forget about your PhD s. That’s your hangup. All the studies except AEI say that the …average… public and private total compensation are roughly equal.
    “The 90+% Public Sector reminder make similar (or MORE) in cash wages ….. ”

    You must be slipping. Even the most conservative study refutes that.

  9. Avatar
    Tough Love says:

    Quoting SeeSAw …… “What were “they” doing for the other 20 years of their working lives!!!!”

    Heavens, perhaps they were doing something “productive”, like working in the PRIVATE Sector, and not unjustly sucking at the Taxpayers teat.

  10. Avatar
    Izzy Cohen says:

    SeeSaw, in the past you could safely post propaganda that there are no pensioners getting $20,000 pensions for five years of work, but today the information is out there for all to see. All it takes is five years of work at a job paying $160,000 for general California and local government employees to get a $20,000 pension starting at age 55, or $133,400 for safety employees at around age 51. And unfortunately for taxpayers, there are thousands of state and local government jobs paying that kind of money. Or, they can get more than $20,000 a year pension for five years of work and retire even younger on phony disability, like Aaron McFarlane who gets a $53,000 pension for only four years of service. He has been getting his “disability” pension for twelve years so far, since age 31, while working actively as an FBI agent! And there are plenty more like him!

  11. Avatar
    SeeSaw says:

    Izzy: Pension of $20,000 for five years’ work “at the age of 50”–don’t forget that part. You will not find any–if you do it is an exception–there are such things as exceptions.

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