A backdoor attempt by CalPERS to trim an absurdly generous pension backfired, resulting in a $7.7 million payment last year to the heirs of a man who retired as a top state Senate aide more than 40 years ago.
The settlement after a lengthy court battle took a big bite out of the Legislators Retirement System, which has been shrinking since a term-limit initiative, Proposition 140 in 1990, ended pensions for new legislators.
The court settlement last year nearly equaled the annual amount of pensions paid by the plan. During fiscal 2009-10, payments to 266 retirees totaled $7.9 million, an average of $29,535.
But the system’s investment fund still had a market value of $114 million in June of last year. And in a fact sheet that the California Public Employees Retirement System gave a legislative committee this month, the system stands out.
It’s the only one in which the employee contribution is zero.
In the other CalPERS state systems, employees contribute 5 to 11 percent of their pay toward their pensions, usually with a matching contribution from the employer that is two or three times larger than what employees pay.
The employee contribution has been zero in the Legislators Retirement system since 2000, when it became “super funded” with more than enough assets to pay future obligations.
The surplus has fallen due to the court settlement, two years of investment losses and choosing a smaller “margin for adverse deviation” for the declining fund that dropped the earnings forecast to 6 percent, well below the usual CalPERS forecast, 7.75 percent.
