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Conference Committee on Public Employee Pensions Discusses Hybrid Plans

US Coins
January 26, 2012
On Wednesday, the Conference Committee on Public Employee Pensions held its third meeting, this time discussing hybrid pension plans.

Presenters during Wednesday's meeting included:

  • Keith Brainard, research director, National Association of State Retirement Administrators;
  • Diane Oakley, executive director, National Institute on Retirement Security; and
  • Ed Derman, deputy chief executive office, Plan Design and Communication, California State Teachers' Retirement System (CalSTRS).

Brainard presented findings from other states which have instituted hybrid plans. He gave examples from Nebraska, Ohio, Texas, Oregon, and Rode Island as well as others and described the differences each state made in developing and implementing their hybrid plans. His handouts included the "Essential Design Elements of Hybrid Retirement Plans" and the "NASRA Issue Brief: State Retirement Plans."

Oakley provided the history and current status of the Federal Employment Retirement Plan. She spoke about the origins of the federal retirement system, the development of the Federal Employee Retirement System (FERS), how the Federal Thrift Savings Plan was created, as well as the funding status of the federal system. Her statement has been posted on the League's website.

Derman presented information on the CalSTRS hybrid retirement plan which includes a traditional defined benefit plan, a cash balance plan and a defined contribution plan. Within the cash balance component of the plan are two programs; one available to full-time educators and the Cash Balance Benefit Program for part-time educators. According to CalSTRS, a cash balance plan is like a hybrid, with 401(k) and defined benefit features. Read more about "The Basics of a Cash Balance Plan."

Sen. Mimi Walters (R-Laguna Nigel) raised concern that the committee had not yet taken action on the issue of pension reform. She suggested that the committee ask the Governor's office to release legislative language for his 12-point plan for the committee to consider. She also suggested that the committee prove the importance of pension reform by taking action.

Sen. Joe Simitian (D-Palo Alto) advised the committee that a pension benefit is just one element of employee compensation and it is important to consider all of the elements of the total compensation package. He further suggested that the work of the committee will be to put something forward that is fair, affordable and sustainable going forward. "There is a big picture in which all of these pieces have to fit," he said.

Assembly Member Jim Silva (R-Huntington Beach) cautioned the committee on using a heavy hand that would be harmful to educators.

Assembly Member Michael Allen (D-Santa Rosa) said he hopes that what the committee crafts will be thoughtful and able to stand up to scrutiny by the public, the Governor's office, and other stakeholders.

Sen. Gloria Negrete McLeod (D-Chino), co-chair of the committee, recommended that the committee be deliberate and try and listen to as many stakeholders as possible.

Assembly Member Warren Furutani (D-Long Beach), co-chair of the committee, concluded the meeting by expressing his desire that the committee act on this issue during this legislative session.

It was rumored that the committee was initially going to present its findings to the Legislature this month. But at the hearing, Assembly Member Furutani suggested that the committee should continue to deliberate and talk with the Governor and his staff as well as other stakeholders. The committee is expected to hold another hearing, but meetings details are not yet available. The League will report on any developments associated with the committee.

If you have any questions please contact Natasha Karl.

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