The State Worker: Pension benefits set to get less generous for California's new hires

12/06/2012 12:00 AM

02/26/2013 8:24 PM

State worker retirement potlucks could get a tad uncomfortable starting next month when a crop of new hires with less generous pension benefits gathers around the finger-food table.

A new law kicks in Jan. 1 that sets 62 as the normal retirement age for most state workers hired on or after that date, up from age 55 for most of the current workforce (excluding public safety staff). Employees under either retirement plan can retire earlier with smaller pensions.

Let's assume one of those upcoming retirement gatherings honors a 55-year-old legal secretary with $50,000 of pensionable income and 20 years of service. Annual state pension: $20,000.

His replacement in the potluck line will make the same pension contributions and do the same work for a smaller pension – 1.3 percent at 55 – because she started after Jan. 1.

As she scoops potato salad on her plate, she knows the math: If she were to retire at age 55 with 20 years of service and $50,000 of pensionable wages, her annual state retirement would be $13,000.

Lawmakers approved the lower formula in a pension reform package three months ago. CalPERS, the massive public pension fund, calculated the changes could cut up to $55 billion in costs over 30 years for all of its state and local employers. State employees account for about one-third of its 1.65 million members.

Will the disparity damage morale? Perhaps. One of the allures of government work is that, in theory anyway, everyone is treated equally. But the state's pension system now has varying rewards based on the calendar.

The diminished pensions may affect recruitment of some already hard-to-entice professionals, such as lawyers, who earn more in the private sector.

Other jobs more accessible to the public probably won't be affected. The Highway Patrol anticipates 60,000 online applicants next month for its cadet academy. Caltrans' highway maintenance worker eligibility list has 20,000 names.

We've been here before. In the 1990s, the state enacted a two-tier retirement system. Employee unions complained that the system was unfair since pensions are a form of compensation, just like pay.

In 1999, then-Gov. Gray Davis signed legislation that boosted benefits, allowed lower-tier workers to move up – and enhanced their retirement benefits retroactively.

CalPERS said at the time that its investments could absorb the added costs. But after suffering big losses the last few years, the fund didn't take an official position on the September pension bill, including its ban on retroactive increases.

But institutional memories fade. Years of plenty follow years of famine. Today's labor and elected leaders will leave. Political winds shift. New laws replace old.

And more and more state workers will bid wistful goodbyes to senior colleagues who were lucky to hire on at the right time.

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