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Public Employee Pension Reform Act (AB340)

Public Employee Pension Reform Act (AB340). What does this really mean for us as Public Sector workers?. Defined Benefit (DB) Plans. A certain benefit is guaranteed upon retirement e.g., $900 p/month CalPERS : 3% @ 50 and 2% @ 55

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Public Employee Pension Reform Act (AB340)

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  1. Public Employee Pension Reform Act (AB340) What does this really mean for us as Public Sector workers?

  2. Defined Benefit (DB) Plans • A certain benefit is guaranteed upon retirement e.g., $900 p/month CalPERS: 3% @ 50 and 2% @ 55 • The benefit is guaranteed no matter what happens in the market

  3. Defined Contribution (DC) Plans • The amount of contribution is defined, but not the amount of benefit e.g., 401K (up to $16,500 p/year) e.g, up to 25% of annual income e.g., may include employee contribution • If the market goes down, no guaranteed benefit

  4. Types of Public Pension Funds • CalPERS • CalSTRS • Act of ‘37 County Funds • City Funds: SF, LA, Fresno, etc. • Special Independent Funds: water district, Housing Authority

  5. WHO does PEPRA cover & WHEN does PEPRA take effect? Law becomes in effect January 1, 2013 Affects employees in CalPERS & ’37’ Act Counties Most changes affect “NEW” members • Upon expiration of existing contract or MOU • Employee NEVER in public pension system • Employee moves between public employers in same system w/ more than 6 months break

  6. What does PEPRA change for NEW Members? • Compensation for benefits calculation is CAPPED $110,100 if SS participant 120% of $132,120 if not a SS participant Adjusted each year by CPI • Even if you earn more, no longer used to determine pension • No contributing employer can have a plan with higher caps • Judges retirement Systems I&II excluded from caps!

  7. What does PEPRA change for NEW Members? • 1% at early retirement age of 52 (increased from 50) • 2% @ normal retirement age of 62 • 2.5% max @ retirement age of 67 (increased from 63) • New workers will have to wait until age 67 for max benefits, compared to age 63 for current workers

  8. How does PEPRA affect CURRENT employees? Union contracts in effect on 1/1/13 will/should remain status quo until its expiration: • Required to pay ½ of normal cost of plan • Employer cannot impose full law until 1/1/18 – Impasse procedures apply • No more purchasing of “Air Time” after • Eliminates spiking from special compensation • Eliminates retro pension increases • Prohibits employer from suspending contributions necessary to fund annual costs

  9. In other words…… • Pay More • Get Less • Wait longer to Get Less

  10. But WHY!? • Erosion of DB pensions in private sector lead to pension ENVY and a race to the bottom • Our pensions have been scapegoated for state’s budget crisis - ALEC • Corporations race eliminate DB plans • Deliberate policy choice to shift risk of employer to employee • Ignore, cover up that median pension is approx. $25k, average about $18K • Publicizing $100,000+ pensions – which are not our members – really management!!

  11. Your current Plan in Santa Cruz County • Contract expires on 9/10/2013 • Employees contribute ZERO • 2% @ 55 currently • 2nd tier - 2% @60 not implemented yet

  12. So What Next? Prepare to FIGHT BACK!!! • Attend worksite meetings • Join the negotiating team when time comes • Become a Contract Action Team (CAT) member • Be informed, get involved and talk to your co-workers

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