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Allen: Pension reform ‘a work in progress’

Assemblyman Michael Allen says pension reform is “a work in progress,” with additional steps potentially including a hybrid system that shifts some of the risk for investment losses from taxpayers to public employees.

Assemblyman Michael Allen

Gov. Jerry Brown included the hybrid model in his reform proposal, calling for something resembling a 401(k) to go along with reduced pension guarantees. In a telephone interview with The Press Democrat’s editorial board, Allen said it was Brown who opted to leave it out of the package presented to the Legislature on Friday. Federal employees have had a hybrid retirement system since 1986, and the federal pension system isn’t experiencing the shortfalls and unfunded liabilities plaguing state and local retirement programs. “We could revisit the issue at a later date,” Allen said.

In fact, he implied that it was likely. He said cities and counties are concerned that the pension cap included in the state legislation might make it harder to recruit people, especially at the upper end of the pay scale, and that a 401(k)-type benefit might be an incentive. He said several factors made it difficult to work out in the negotiations between Brown and legislator, including the fact that some public employees are eligible for Social Security and some are not. Allen, who was recently appointed chairman of the committee that handles pension issues, said the lobbying groups for cities and counties will be invited to offer suggestions for a hybrid system.

Allen says the most important feature of the reform plan is the “hard cap,” which limits the amount of income that can be counted toward pension benefits. The result will be to keep most pensions below $100,000 a year. However, fewer than 5 percent of public employees will be affected.

I still think the state should adopt a system modeled on federal employee retirement. At age 60, they are eligible for a pension equal to 1 percent of salary for every year of service, with a small bump for working until they’re 62 (compared to 2.5 percent at 67 under California’s reform plan). They pay into and collect Social Security, putting them on par with private sector workers. And they have a 401(k)-style account, with taxpayers contributing 1 percent of pay and employees augmenting it.

Together, the three legs provide a pension worth about two-thirds of an employee’s salary (presumably we’ve all saved a bit and paid off major expenses like kids and mortgages before retiring). The pension portion is guarantee, meaning taxpayers make up the difference for stock losses. The savings plan, like a 401(k), isn’t guaranteed. Employees can opt for higher or lower risk investments based on their individual needs and comfort levels.

By various estimates, the California plan could save $30 billion to $60 billion over 30 years. And by various estimates, California’s pension funds are short of covering their obligations over those same 30 years by $150 billion to $450 billion. So Allen’s probably right. We’ll be revisiting this issue again in the not-too-distant future.

- Jim Sweeney





16 Responses to “Allen: Pension reform ‘a work in progress’”

  1. No Pension ,no cry says:

    I say , get rid of all pensions it’s just not fair for the rest of us that realy work for a living!.

  2. Beef King says:

    Michael Allen was known to the voting public as tool for greedy union thugs, and so far he has kept his promise to fleece the taxpayer in order to line the pockets of his pals.
    Big surprise.

  3. James Bennett says:

    Yeah, it’s a work in progress alright.
    We’re the one’s being worked.
    Unions are being used as an instrument of social engineering, imposed polarity, small business sabotage (A21) and to indoctrinate us to socialist principals.

    Part of the DELIBERATE crashing of our system.

    They have a new system under construction.

    First there is demolition to do.

    THAT is what we are witnessing.

    It’s not an incompetent thing.

    It’s not a left right thing.

    It’s a globalist takeover thing.

    All these stories that don’t pass our smell test, that seem anti-intuitive are are all part of the same insideous Agenda.

    Our public officials all have the same disease…goalongitis. They keep going along to get along.

    I wish there was a pill to cure it.

  4. bear says:

    Hi Friends,

    Think about all this as a matter of total compensation for a job performed over decades. Think of “public safety” and “general” employees as being two separate groups. Sonoma County employees pay SS taxes just exactly like you do. Other government agencies may be different. Complex? You bet.

    There is no “free ride” on healthcare for Sonoma County retirees. You must work at least 10 years AND retire from the county to get anything at all. Anything being $15K a year for two if you retire outside the county. Not a free ride.

    So the detail here is what work did you do, how long did you do it, how much was your actual take-home salary, how much could you have made elsewhere, and how did promised retirement benefits figure into individual decisions to take the lower-paid County jobs?

    If you want no County employees or services, you could have this. Do you think that contracting out to the private sector with minimal benefits will solve the problem? I’m sorry, but any if you research the history of government contracts you will see that this is the wrong path.

    If you asked me 30+ years ago what my retirement benefits might someday amount to, I honestly couldn’t answer the question. But I wouldn’t have wished the current situation on anyone.

    Should I apologize more? This situation is anguish for County retirees.

  5. Reality Check says:

    Anyone who lives in Allen’s assembly district (7) should check their mail today for a campaign flyer from Allen . . . . . except that it isn’t a campaign flyer. It looks like a campaign flyer in every detail. Yet, it’s not. It’s “official business,” paid for by taxpayers, to inform constituents of his “Homeowner Bill of Rights” bill.

    The are plenty of politicians with whom I differ yet respect. Allen has no sense of propriety. None.

  6. Follower says:

    @Sarkyfish
    “…raise public employees’ retirement ages”

    FROM 50 TO 52!

    …How will they ever endure such a hardship?!!

    ANY “changes” will be short lived and pointless unless we BAN PUBLIC EMPLOYEE UNIONS COMPLETELY!

  7. Union Guy says:

    3% @ 50 started with the start, CHP, and rolled downhill. You think that tanked the system? You are wrong. Greedy politicians did the same thing to pensions as Social Security. They spent the money elsewhere. New welfare, new tech, new feel good centers. other stuff. They spent 20 years, ok, 19 years, not putting any of their portion into the program. 19 years that could have been growing all through the boom years, ready to fund the future. No, they didnt put their share aside and the system is now dependent on the employee’s share, which by law, they put in every dime, and there is a shortfall. Duh.
    Now everyone is calling the public employee a greedy creep, because their elected saviors acted in a thieving manner. They were warned for decades by the unions that they needed to stop. Nope, just spent all your money elsewhere. Now the employees are the bad guys? Sonoma county was given a ay out 5 years ago and refused because they did not think of it themselves and were too arrogant to take the word of an uneducated, corrupt union rep. What do we know? Well, we can use a calculator and told them their plan would cost an extra $20 million a year. We were wrong, it was $22 million a year. Now they have had to spend an extra $110 million over 5 years and still going. Put the blame where it belongs. We tried to fix it. No good deed goes unpunished.

  8. Juvenal says:

    @great ideas

    “All this is another opportunity for Allen to get his name in the paper.”

    Have you read the bill? Assemblyman Allen has co-authored a bill of wide scope and extreme complexity.

    There are far easier way to get one’s name in the paper… .

  9. Juvenal says:

    A “hard cap” will become a hybrid system, at least for high earners, when additional money is put into other investments.

  10. John Morton says:

    Passing laws is not art. The state legislature are not artists with works in progress. Unlike art, laws have a direct impact on people’s lives everyday.

    When the state legislature acts or does not act there are consequences.

    Allen and his fellow leftists have adopted public pensions that have bankrupted cities and run up a $500 billion dollar state pension deficit.

    They don’t have time to play around the edges of the crisis, they need to address it head on and that is something they are unwilling to do.

    The pension laws have to be changed and drastic cuts made in how pensions are paid out and under what circumstances.

    Little changes here and there will just keep the monster growing and the end will not be pretty for anyone involved. Allen will not address the problem because he is not a problem solver. He helped create this pension budge mess when he headed SEUI.

  11. Snarky says:

    Social Security for private sector workers.

    Social Security for public employees.

    DIS-mantle public employee pensions.

  12. Sonoma Coma says:

    Great first step Assemblyman Allen.

    The next step is to vote out those who authored and voted in this pension system….

  13. Sarkyfish says:

    And now the essential and important information left out of this Inside Opinion piece.

    Reuters
    California Gov. Jerry Brown and lawmakers have reached a deal to raise public employees’ retirement ages, have them pay more into their pension accounts and cap retirement payments in a vast overhaul of the state’s pension system that he says will save $30 billion. Union leaders panned the deal and hope to drum up support for his tax measure on the November ballot by showing voters they can tackle big challenges.

  14. bill says:

    Pensions for public employees will bankrupt government and insult private citizens who are taxed for no good reason.

    Until public pensions are the same as social security this entire discussion is a sham.

  15. Great Ideas says:

    All this is another opportunity for Allen to get his name in the paper. He and his band of SEIU backed cronies have no intention of making any changes the the public pension system that will make a real cut in the $450 billion pension deficit.

    This guy helped create the deficit when he headed SEIU. Now he has see the error of his ways. How easily can you be fooled?

  16. GAJ says:

    Modeling after the Federal system makes a lot of sense which is exactly why nothing like that will come to pass.

    Pension Reform needs a hard cap at $100k and elimination of 3% annual vesting with 2% being the rule.

    Whatever is done, however, will not change the fact that it will take 30 years at least for the baby boomer generation’s greed to be flushed from the system so that services can return to some sense of normalcy.