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Legislature Passes Pension Reform, Sends AB 340 to Governor for Signature

The League Urges the Governor to Sign this Historic Legislation

August 31, 2012

On the final day of the 2012 Legislative Session the Legislature passed AB 340 (Furutani), the League-supported pension reform measure. Action in both houses commenced in the afternoon with both the Assembly and Senate passing the measure by large margins.


The League board of directors on Thursday, Aug. 30 voted to support AB 340, expressing that: “While not perfect, the League views this legislation as a substantial step forward in implementing pension reform largely in keeping with the League’s own comprehensive pension reform principles. This recommendation is made in recognition that there are numerous questions of implementation and interpretation that will need to be resolved in the days and months ahead. The League and cities will continue to be vigilant in advocating for effective pension reform to ensure the intent of this historic legislation is respected. Finally, the League board congratulates the elected and appointed city leaders of California for their pension reform actions to date, and it respectfully urges them to continue their leadership on this vital issue at the local level.” 

If signed by Gov. Jerry Brown, and his signature is expected, the legislation would save an estimated $42 – 55 billion over the next 30 years according to a statement issued by CalPERS today. The proposal applies to all public employers and pension plans on or after Jan. 1, 2013, with the exception of the University of California as well as charter cities and charter counties that do not participate in CalPERS or the 37 Act System.

AB 340 makes changes to public employee pensions including establishing a cap on the amount of salary that can be used to calculate a retirement benefit, raising the retirement age for both public safety and miscellaneous employees, implementing cost-sharing, using the average of the final three years to calculate final compensation, implementing a 180 day sit-out period for retired persons to return to work in the retirement system in which they receive a pension, defines “pension compensation,” a pension forfeiture requirement for public employees convicted of committing a felony in connection with their job, the elimination of airtime, pension holidays and pension spiking.

All aspects of the legislation apply to new employees after Jan. 1, 2013. Four provisions, cost sharing, the six month sit-out requirement, and the elimination of airtime and pension holidays, apply to current members in the system.

The League has prepared a side-by-side analysis of the plan and the pension reform plan adopted by the League board of directors in July 2011.

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