A bill by state Sen. Steven Glazer, D-Orinda, giving new state workers the option new University of California workers received two years ago, a 401(k)-style plan rather than a pension, is opposed by unions and soon may be opposed by CalPERS.
More than a third of eligible new UC employees have chosen a 401(k)-style plan. Instead of a guaranteed lifetime monthly pension check, the 401(k) plan that replaced pensions in most of the private sector uses individual tax-deferred investments to build a retirement fund.
A 401(k) plan avoids pension debt, now a soaring cost for many governments. Employers only make a “defined contribution” to the retirement fund of an active employee. As critics point out, the risk of investment loss is shifted from the employer to the employee.
But as the UC example seems to show many employees, apparently not planning a full government career, prefer a portable investment plan they can control and take with them to a new job.
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