By Dan Berman
California Gov. Jerry Brown is urging the board of CalPERS
, the nation’s largest public retirement system, to impose hikes in employer contributions immediately because of statistics showing costs will rise as retirees live longer. CalPERS staff had recommended the increases be delayed for two years.
In a letter to the board, Brown said increased longevity would cost the system $1.2 billion more per year than today. That’s an increase of 32 percent. Unfunded liabilities, the governor wrote, would rise by $9 billion to $54 billion without the additional revenue from employers.
The governor said that since 2010, projections show that a man retiring at age 55 in 2028, would have a life expectancy
2.2 years longer than was projected in 2010. The increase for a woman would be 1.6 years.
Brown said that waiting two years to impose the rate increases would add $3.7 billion in costs over the next 20 years.
“No one likes to pay more for pensions, but ignoring their true costs for two more years will only burden the system and cost more in the long run,” Brown wrote.
The rates proposed by the CalPERS staff would be about 50 percent above the current levies. Most employers would see a rise in contribution rates from 21 percent of an employee’s pay to 31 percent. Employees contribute 8 percent of their pay.
The CalPERS board is scheduled to meet this month.
Reforming the state’s pension system
has been a hot issue in the state for at least two years. In 2012, Brown pushed through the legislature a bill that was meant to ensure the system’s long-term stability.
Some parts of the bill, particularly those dealing with reductions in benefits, have been fought by unions who say the only way enact such changes is through collective bargaining.
Originally published on BenefitsPro.com