Pension Reform Could Save CalPERS $42B

If enacted, CalPERS estimates the proposed legislation will save between $42 billion and $55 billion over 30 years for CalPERS-administered pension plans.  

The analysis only reflects the savings for employers participating in CalPERS and only for retirement benefits provided by CalPERS.  A complete analysis of the cost impact of the changes will require information on the impact on other systems and on other areas such as post-retirement medical benefits.  

In preparing this analysis, CalPERS actuaries had to make many assumptions, including: 

• The use of the current discount rate of 7.5%; 
• Revised assumptions about members’ probability of retirement (to reflect the lower benefit levels); 
• Assumptions about the characteristics of new hires (such as age and salary at hire); and 
• Local agencies will behave similarly to a sample local agency chosen for the analysis. 

Actual retirement experience could produce higher or lower savings if it differs from the assumptions used in the analysis. For instance if the average retirement age increases more or less than expected, the savings will be greater or less than shown.  

California Governor Jerry Brown announced a compromise pension reform plan last week (see “Calif. Governor Puts Forth New Pension Proposal”). News reports indicated the legislature approved the proposal.

More information about the analysis is here.