CalPERS retirees are not causing the state to go broke. Here is how it works. CalPERS contracts with different agencies: State, County, City and some School Districts.
The terms of these contracts vary between agencies depending on what the benefits are. A cost per covered employee is calculated and is paid in part by the employee and the employer or agency. The remainder of the cost is paid for by the profits from CalPERS investments. The employee”s contribution is based on a percentage of salary.
The agency”s contribution is based upon the amount of profit from CalPERS investments. In a few cases, some agencies have not had to make any contributions for a few months. Recent agency contributions have ranged from a low of 1.9 percent to a high of 3 percent.
A prudent agency would set aside money when contributions are low to act as a reserve when the contributions increase due to a plummeting economy.
Now that CalPERS investment profits have dropped because of the downward plunge of the economy, the agency”s contributions have increased.
Note that this is not only the state agency but all the other agencies, cities, counties, and some school districts. This small increase is not what is causing the state”s budget problems. The increased cost to one agency is not passed on to other agencies. That is how the cost for a retiree is funded. Now that the potential retiree has his/her benefit funds building up at CalPERS, it becomes time to retire. He/she may retire in some cases at age 50 or may be required to wait until a higher age. Either way their retiree benefit is based on their and in some cases their spouses” projected lifespan. The younger you retire, the smaller your benefit, work longer and your benefit is higher.
Granted there have been a few cases of fraud and abuse by some agencies, but these loopholes are being closed and the fraudulently asked for benefits denied. This is not a state budget problem but a problem for that particular agency. Also many agencies did not make their payments to CalPERS when required ? they took payment holidays.
This adds to their current budget stress. What about future retirees? The state wants to change the CalPERS retirement system. This means not only State employee, but city, county, and some school districts as well. Your benefits are in jeopardy. The Retired Public Employees Association (RPEA) is working to protect your benefits. Why? Because if they get away with cutting your benefits, they are going after ours next.
To find out what is going on and to help protect your benefits, call RPEA headquarters in Sacramento at 800-443-7732, ask for Tanya, and have her give you the phone number of the Chapter nearest you.
You can join that chapter and get all the news letters to keep you up to date on what is happening to your retirement. This is whether you are retired or still working. Spouses, family and interested persons are also invited to join.
Mike Blake
President RPEA Chapter 12
