12/25/2024

How more generous pensions boosted city costs

CalPERS sponsored legislation resulting in more generous city police and firefighter pensions, SB 400 in 1999, a well-known issue in the debate about whether growing pension costs are “unsustainable.”

But CalPERS also backed legislation, AB 616 in 2001, giving most local government employees the option of bargaining for generous pensions once limited to police and firefighters, who face hazardous duty and may need to retire early from their physically demanding work.

The “3 at 50” pension for police and firefighters in SB 400, which provides 3 percent of final pay for each year served at age 50, is capped at 90 percent of final pay. There is no cap on the three AB 616 pension formulas.

The most generous of the three AB 616 formulas for non-safety or “miscellaneous” employees, “3 at 60,” provides a pension at age 60 that is 90 percent of final pay after 30 years of service and 120 percent of pay after 40 years of service, according to a CalPERS benefit chart.

Why provide a monthly pension payment that is higher than the monthly paycheck earned on the job?

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