CA: State pension revamp sought .. replacing the defined-benefit model with one similar to a 401(k)

Sac Bee ^ | 1/5/05 | Gary Delsohn and John Hill

[NormsRevenge]

Gov. Arnold Schwarzenegger will call for a dramatic overhaul of the state's public employee pension system in his State of the State speech this afternoon, administration officials confirmed Tuesday.

In a move certain to trigger a major confrontation with some of the state's most powerful labor unions, Schwarzenegger aides said the governor will sponsor a package of pension bills for introduction at a special legislative session he intends to call for Thursday.

If the Legislature doesn't adopt the sweeping proposals, aides said, he'll take them to the ballot box - with several other so-called "reform" measures - in a special election later this year.

Aides said the Republican governor agrees in principle with an initiative being filed today by Assemblyman Keith Richman, R-Northridge, that would end traditional pensions for workers hired after July 2007. "The governor believes the taxpayers cannot continue to pay for a pension system that's not found in any other segment of American society," one of his top aides said, "whether it be the federal government or major U.S. corporations."

The administration official acknowledged that Richman's proposed overhaul of the pension system is "radical" and controversial.

That initiative, which was supposed to be submitted to the attorney general's office today, would transform the public retirement system in California, eventually scrapping traditional pensions in favor of investment accounts controlled by the worker with no guaranteed payout in retirement.

[calcowgirl]

"The governor believes the taxpayers cannot continue to pay for a pension system that's not found in any other segment of American society," one of his top aides said, "whether it be the federal government or major U.S. corporations."

While the benefit levels have been raised to outrageous levels compared with the private sector (e.g. 80% of salary paid after age 55, etc.), there are plenty of corporations still running defined benefit plans. Changing to a "401K like" plan will certainly take the heat off the pension fund advisors whose feet will no longer be held to the fire to meet established objectives.