Stockton bankruptcy judge looks at pension cuts

A federal bankruptcy judge, looking at several options, could rule in the Stockton bankruptcy that pensions can be cut, possibly clarifying whether CalPERS has special protection as an arm of state government.

A judge in the Detroit bankruptcy has already ruled that pensions can be cut like any other contract debt. Ballots mailed to Detroit employees, retirees and bondholders last week would approve negotiated cuts or, if rejected, risk having deeper cuts imposed.

In a filing this month backing a retiree appeal of Detroit’s eligibility for bankruptcy, CalPERS argued that, unlike the city-run Detroit pension system, its an “arm of the state” operating under state laws protected in municipal bankruptcies.

The CalPERS filing said the court ruling in the Detroit bankruptcy nullifies part of the federal bankruptcy law, section 903, that “expressly preserves a state’s laws governing its creatures not withstanding the filing of a chapter 9 (bankruptcy) petition.”

U.S. Bankruptcy Judge Christopher Klein said last week during a four-day trial on the Stockton plan to exit bankruptcy, continued until June 4, that the pension issue is a “festering sore” for California.

“It’s conceivable I could conclude that (Stockton’s) CalPERS contract could be impaired and the (financial reorganization) plan not be confirmed,” Klein said, according to a report in the Stockton Record newspaper.

“Or I might conclude the CalPERS contract can be impaired, but in this case the decision (by the city) not to do so made sense. Or I could decide CalPERS can’t be impaired because of California law. That’s what’s going on in my brain. This is an opportunity to get to the bottom of it.”

Judge Klein

Judge Klein


Stockton was forced into a rare exit-plan trial when talks under a court-appointed mediator led to debt-cutting agreements with all major creditors except two Franklin bond funds, who say they would only get $350,000 for a bond debt now worth $37 million.

A turnaround consultant hired by Franklin suggested in a report filed in March that Stockton could fall back into insolvency if the city’s largest debt, “unsustainably high” pension costs, are not reduced in bankruptcy.

Klein said before the trial he wanted to be sure that Stockton would not face a second bankruptcy if growing pension costs are not addressed. He mentioned reports that Vallejo has budget problems after emerging from bankruptcy without touching pensions.

A Wall Street credit-rating agency, Moody’s, said in February that without pension relief Vallejo and the two California cities currently in bankruptcy, Stockton and San Bernardino, are at risk of returning to insolvency.

Vallejo officials said they considered trying to cut pension debt, but did not after CalPERS threatened a costly legal battle. The Stockton plan does not cut pensions, saying they are needed to be competitive in the job market, particularly for police.

The employee share of cuts in the exit plan is staff and pay cuts, lower pensions for new hires under a statewide reform and the elimination of retiree health care, a $544 million long-term debt replaced by a one-time payment of $5 million.

Judge Klein upheld Stockton’s immediate cut in retiree health care after filing for bankruptcy in June 2012, noting that the result may be “tragic hardships for individuals” before claims are addressed in an exit plan.

The judge’s retiree health care ruling cited a part of the federal bankruptcy law, section 904, that prevents the court from interfering with the “governmental powers” and “property or revenues” of the debtor.

In his opening remarks last week, the attorney for Franklin, James Johnston, said the evidence will show that Stockton can pay Franklin even “after paying in full its largest unfunded liability,” pensions expected to take 18.5 percent of the budget by 2019.

Johnston said the Stockton plan has a 15 percent budget reserve, a $2 million contingency fund and available public facility fees. He said the Franklin loan collateral, two golf courses and a park, is worth $15 million not the low value assigned by the city.

Not mentioning Vallejo, the Franklin attorney said the turnaround expert, Charles Moore, would show that the Stockton exit plan to pay pension debt in full is not consistent with the minimal payment of the Franklin debt.

“It’s not a feasibility issue but a fundamental issue of consistency,” Johnston told the court.

Late in the second day of the trial, the judge said he had some questions for the California Public Employees Retirement System. “If I just rubber-stamp plans, I might as well just be a potted plant,” Klein said, the Record reported.

David Lamoureux, CalPERS deputy chief actuary, who had given a deposition but was not scheduled to testify, told the court on the third day about basic CalPERS operations, including how pensions can be cut outside of bankruptcy.

If a CalPERS contract with a local government is terminated, CalPERS calculates the debt or “unfunded liability” that must be paid to cover the pensions promised plan members in the future.

After the payment, CalPERS becomes responsible for the pension debt and cannot get more money from the local government employer if funds fall short as pensions are paid during the life spans of the plan members.

So CalPERS uses a low investment earnings forecast to discount the future debt of terminated plans, 2.98 percent rather than the usual 7.5 percent. If the two Stockton plans were terminated now, CalPERS would ask the city to pay about $1.6 billion.

If a city cannot pay all of the debt owed for a terminated plan, the CalPERS board has the power to evenly cut pensions to an amount that would be covered by what the city was able to pay.

But after the payment has been made and responsibility for the plan shifts from the city to CalPERS, if the terminated pool falls short the funds of all of the state and local government plans in the system could be used to cover the shortfall.

The terminated pool is financially healthy as of June 30, 2012, with members from about 90 small plans and $178 million in assets to cover $84 million in future pension obligations.

Lamoureux said there are two ways a CalPERS plan can be terminated: at the request of the government employer, which takes effect a year later, or by action of CalPERS if plans do not make their required contributions, effective 60 days later.

San Bernardino did not make CalPERS payments for a year, owing $17 million before resuming payments last July. Skipped payments by a big plan may be one reason CalPERS lowered its discount rate for terminated plans from 4.82 percent to 2.98 percent.

Last week CalPERS agreed to delay an August hearing on its appeal of San Bernardino’s eligibility for bankruptcy, saying in a joint filing with the city that the delay is “critical to the success of the ongoing mediation,” the San Bernardino Sun reported.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Calpensions.com. Posted 19 May 14

51 Responses to “Stockton bankruptcy judge looks at pension cuts”

  1. MIKE MORTENSON Says:

    teamsters went to jail for losing pension funds. cities should pay retired employees pensions and those who are vested year the city stops paying or it is a very criminal act against the retired. after any bankruptcy the city or agency should make payments as long as necessary to settle the debt to the employees who earned that money. calpers seems to be far more successful than social security and should be applauded.

    Date: Mon, 19 May 2014 07:43:46 +0000 To: mikecebu@hotmail.com

  2. Tough Love Says:

    CalPERS has WAY too much independent decision-making authority that should belong to the legislature. For example, the switch from the 4.82% to the 2.98% rate for valuing terminated plans seems as much a political/punitive decision than an actuarial one.

    In addition the policy outline in the following quoted paragraph is problematic:

    “But after the payment has been made and responsibility for the plan shifts from the city to CalPERS, if the terminated pool falls short the funds of all of the state and local government plans in the system could be used to cover the shortfall.”

    That paragraph suggests that the participants of terminated Plans will likely not get reduced payouts even if terminated plan assets fall short, with the asset-shortage made up from …”the funds of all of the state and local government plans in the system “….. meaning THEIR Taxpayers.

    With CalPERS Board so pro-Union, I’m not surprised at that procedure which effectively says that the payouts of any Plan are backed by the OTHER Plans. Of course, we all know that any ADDITIONAL funds needed will come from an an increase in TAXPAYER contributions. Taking CalPERS posture of never allowing a reduced payout in such cases suggests that if 50% of all participating CalPERS plans failed and terminated with insufficient assets, then the OTHER 50% would have THEIR contributions increased sufficiently so that no pensions are ever reduced.

    Why CA’s Taxpayers continue to accept being the sucker in all things CalPERS, bewilders me.

    ALL CalPERS DB pension should be frozen with ZERO growth for the future service of all CURRENT workers. This beast can only be stopped by completely killing it. California’s future depends on the death of CalPERS.

  3. Captain Says:

    Star – Star -Star -Star – Star

    – That’s Five Stars for the above comments rgarding CalPERS, TL.

    In news regarding the ACT 37 pension plans (counties and large cities), most of us here in CA are stuck dealing with CalPERS at the city/special district level and the ACT 37 plans at the county level. Both systems are beyond repair absent massive taxpayer cash infusions

    Reforming Defined-Benefit Pension Systems in Bakersfield and Kern County: http://reason.org/news/show/pension-reform-bakersfield-kern

    If you haven’t read this excellent article I’m encouraging you to do so. Here is an excerpt:

    “We have a big issue that we still need to address here at the county within our own retirement plan—the Kern County Employees’ Retirement System—with a provision called the supplemental retirement benefit reserve (SRBR). We’re one of only three counties that adopted SRBR back in the 1980s (they all do it in one form or another -even CalSTRS is doing it) . If your retirement plan performs above the expected rate of return—which for us is 7.75%—then about 40% of the excess earnings gets siphoned off into that SRBR fund (unbelievable!). What that does is provide for additional cost of living increases over and above the normal rate, which I believe is 2% a year. The retirement board can make a determination from year to year on whether or not they want to allocate a supplemental cost of living increase.

    But the effect of SRBR is this: in good years, 40% of excess earnings are siphoned off, and it doesn’t go in to bolster the main pension fund. But in bad years where you perform below the rate of return, the SRBR isn’t affected at all. The result of that is that the SRBR is currently 170% funded, yet the regular retirement fund that goes to pay the benefits to retirees every month is only funded at 61%, and it’s projected to drop. But the SEIU—our main union—will not agree to let us shift funds from the SRBR to the main fund. So we would have to go to Sacramento to change that, and SEIU won’t support it unless we give them a pay raise, and we can’t afford to do that right now. So the struggle goes on. I should note that the other unions are generally supportive, and our firefighter union has been publicly supportive of the change, which I applaud and appreciate.

    SRBR reform is the next thing that we really have to fix for the overall health of the fund, and we’re going to continue to try and talk to the unions and get them to see that it’s for everyone’s benefit that we fix that.”

    The entire article is outstanding! Reading that this plan skims 40% of what’s VERY LOOSELY defined as excess earnings makes me wonder what relevance the 7.75% return rate even has. In this case lowering the discount rate to 7% would only compound the problem because they’d probably just skim 40% of everything beyond the 7%. Can they ever catch up (full funding)? I doubt it.

    The Governor & Attorney General should deem this practice illegal without hesitation. Only an idiot, or a pension board consisting of recipients that benefit from this largesse and whom are also banking on the “California Rule” for protection against adjustments, and taxpayers for future funding, could have ever conceived of such a corrupt plan – let alone approve it.

  4. Tough Love Says:

    Some more CalPERS poison heading our way …….

    CalPERS not only administers Public Sector pensions and some retiree healthcare, but it also sells Long-Term Care insurance to it’s members on a voluntary-purchase basis with the members who elect such coverage paying the FULL premium. In this arrangement, the Taxpayers have absolutely NOTHING to do with it …. NOTHING.

    Yet, I’ll bet dollars-to-donuts that the Taxpayers …. who are NOT a party to these Long Term care contracts solely between CalPERS and those purchasing coverage ……. get stuck with paying for much of it. Here’s why …

    CalPERS marketed this coverage in a manner very similar to private insurance companies. While “legally” they can increase premiums (not for individual insureds based on their own claims experience, but for large blocks of business based on the group’s developing experience), the intent (at the time of sale) is that premium should not need to increase much, if at all. And, the marketing materials often hype the latter level-premium “intent”, glossing over the “legal” right to raise rates if developing experience so necessitates.

    Well, CalPERS WAY-underpriced this coverage and is planning on an 85% increase for one of the more “Cadillac” options (lifetime coverage with annual cost-of-living increases). Not surprisingly, those impacted have sued to stop the increases while maintaining the full coverage.

    Financially, current premiums are woefully inadequate to pay for the promised benefits, so either the benefits get reduced or incremental revenue is needed to pay the full (current) benefit structure.

    If those suing win their lawsuit, … meaning no increase in premiums and no reduction in benefits where will the funds to pay the benefits come from ? Hint …. CalPERS only has one source of funds, the Taxpayers. Even though they are NOT a party to this contract, dollars-to-donuts, CalPERS will be looking to the Taxpayers to pay for it. It has no other options.

    CalPERS is “poison” and should be killed-off or it will continue to create MORE havoc for Taxpayers.

  5. Captain Says:

    TL, it’s kind of ironic that the CalPERS annuitants are suing their own pension plan because they’ve failed to deliver the investment returns necessary to fund the Long Term Care benefits their members were promised. I’d like to say maybe they now know how/why the taxpayers feel the way they do about CORRUPT CalPERS.

    “Yet, I’ll bet dollars-to-donuts that the Taxpayers …. who are NOT a party to these Long Term care contracts solely between CalPERS and those purchasing coverage ……. get stuck with paying for much of it. Here’s why …

    CalPERS marketed this coverage in a manner very similar to private insurance companies. While “legally” they can increase premiums (not for individual insureds based on their own claims experience, but for large blocks of business based on the group’s developing experience), the intent (at the time of sale) is that premium should not need to increase much, if at all. And, the marketing materials often hype the latter level-premium “intent”, glossing over the “legal” right to raise rates if developing experience so necessitates.”

    – You could just as easily be describing CalPERS and SB 400, TL. Taxpayers are also paying all the increased legal bills that CalPERS has been racking up due to their many corruption scandals, bankruptcy court dealings, and slush funds. When they get the bill they just push it to the taxpayers side of the table in the form of administration costs. They are essentially using taxpayer money to fight against the will of the taxpayers. Sick!

    CalPERS spent a decade selling airtime, years of service credit, at up to 37% below cost. When they finally notified members of the impending cost increase for future airtime purchases, CalPERS gave advanced notice to their members encouraging those that wanted to purchase up to five years of airtime to do so by the end of that year (with about a three month window), before rates changed.

    CalPERS is CORRUPT

  6. Captain Says:

    The sooner CalPERS is neutered the better off this state will be, and real reforms can commence. CalPERS needs to be broken up into more manageable Baby-Bell size pieces with Board Members that represent the public interest. If taxpayers have to pay for this boondoggle they deserve to have control of the Board of Administration. As far as I’m concerned CalPERS and the CalPERS Board of Administration deserve a vote of NO CONFIDENCE, and a grade of “F”.

    CalPERS claims that they’re an arm of the state are ludicrous. If that were the case CalPERS should be eliminated as they represent the interests of a very few while negatively impacting the vast majority of Californian’s. CalPERS is nothing more/nothing less than a ROGUE organization that is driving our cities into insolvency, both financial & service insolvency, due to their own failed policies, mis-management, greed, and corruption.

    CalPERS is CORRUPT

  7. SeeSaw Says:

    Yes, Captain CalPERS represents the interests of its members which number 1.6 million–a small number when compared with the state population of almost 39 million. Its fiduciary duty to its members, solely, is a requirement of the Constitution of the State of CA. If I had my druthers, many more people would be fortunate, as I am, to be members of CalPERS. The organization has been of benefit to millions of CA public workers over a period of 80+ years. Your remarks are nothing but the rantings of a very miserable human being–I pity you, but do hope that things improve for you in the future.

  8. Captain Says:

    Yes, SeeSaw, I know. But what you’re describing is a classic PONZI SCHEME where by the masses all contribute their dollars to a very few beneficiaries (CalPERS represents the interests of …1.6 million–a small number when compared with the state population of almost 39 million). The relationship of giving and taking is shaped like a Pyramid – another name for a PONZI SCHEME.

    If it makes you feel better I actually think CalPERS, at one time, was an excellent organization. Unfortunately, over the past few decades, CalPERS has morphed into a very destructive organization that has become a Public Employee Union Tool to often used for political reasons & intimidation. The once cool CalPERS is now a complete mess and CalPERS/the Public Employee Unions have run this Titanic into the ICE BERG.

    CalPERS needs to be sliced & diced into little pieces.

    CalPERS is CORRUPT

  9. Tough Love Says:

    Captain, The real answer is that “control” and “decision-making” of Public Sector pensions (specifically the pension formulas and ALL of the provisions) needs to be under the full control of ALL Taxpayers, not a small group beholden to the Public Sector Unions.

    And notwithstanding CA’s Constitution, regulations, laws, or Case Law, the pension accrual rate for all CURRENT workers must be materially reduced (by at least 50%) for all future service. NOTHING else will work.

  10. SDouglas47 Says:

    The world according to TL:

    ” notwithstanding CA’s Constitution, regulations, laws, or Case Law,”

    Wouldn’t it be swell if we could ignore that stodgy old Constitution.

  11. SeeSaw Says:

    You are so out of it, TL. CalPERS is an arm of the state of CA and it has no official connection with public sector unions. Union membership, or not, is irrelevant when dealing with CalPERS. CalPERS has existed for over 80 years. The public sector unions in CA started in 1968–46 years ago. The majority of highly paid retirees in CalPERS are not from unions. There are 13 CalPERS Board members elected by various groups made up of individuals–there is no vote allotted to any union for a choice of a Board Member! If you are going to continue ranting about this subject, make sure that you have facts at hand–opinions do not count.

  12. Captain Says:

    SeeSaw Says: “CalPERS is an arm of the state of CA and it has no official connection with public sector unions.”

    -try again.

    “Union membership, or not, is irrelevant when dealing with CalPERS.”

    -says who? You? Try again.

    “The majority of highly paid retirees in CalPERS are not from unions.”

    – complete bull!

    CalPERS is CORRUPT!!!

  13. Tough Love Says:

    CalPERS isn’t an “arm” of anything.

    It’s a CANCER inflicted upon California’s Taxpayers.

  14. SeeSaw Says:

    My statements are facts. Your statements are opinion–pure BS!

  15. Bille Says:

    Great posts Seesaw!

    The TL and Captain Trolls are working with the concept that if you tell a lie big enough, people will eventually believe it. As they are the only one giving each other bloggo hi-fives, I’m working with the concept that their too ridiculous for even the heaviest of mouth-breathers to support.

  16. Tough Love Says:

    Go ahead Billie, Tell me ANYTHING that not accurate with the following demonstration that CA Safety worker pensions are on the extreme end of GROSSLY EXCESSIVE:
    —————————————————————————–
    In California the typical recent Pubic Safety retiree’s pension starts at just about $100,000 and is COLA adjusted thereafter. By looking at a table of life annuity factors, such a single life immediate annuity has a value or cost upon retirement of just about $1.8 Million (18 times the annual pension). One way to judge if that is reasonable (or “appropriate and fair”) is to answer the question … What would be the necessary INCOME LEVEL (or Final Average Salary … FAS) of a Private Sector worker with the TYPICAL Private Sector DB pension (for the few Private Sector workers lucky enough to still be covered by such a pensions) to obtain a pension from his/her employer with the SAME $1.8 Million “value” upon retirement ?

    Assume the CA safety worker has the typical 3% of final average pay per-year-of-service pension factor, had a final average salary of $111,111, 30 years of service and retired at age 55… resulting in the starting pension of $111,111 x .03 x 30 = $100,000. Next, let’s assume the Private Sector worker’s DB pension formula is 1.25% per year of service (a quite typical formula), is NOT COLA adjusted (routine in PRIVATE Sector Plans), and has a full unreduced retirement age of 62 (with a 4% reduction in pension payout for each year of age that you retire begin collecting your pension before age 62).

    For a given Final Average Salary (FAS), this Private Sector worker’s annual pension (P) is given by the formula P = (FAS x 30 x .0125)x (1-((62-55)x.04)), with the latter part of that formula being the adjustment for early retirement at age 55. Shortening that formula, we have P = (FAS x 30 x .0125) x 0.72.

    From above, we saw that the Safety worker’s pension (being COLA-increased) has a lump sum “value” of 18 times the annual STARTING pension. With no COLA increases, the lump sum “value” is only 13 times the annual pension. Therefore the Lump Sum “value” of the Private Sector worker’s pension is given by 13 x P, and since we are SETTING that value equal to the $1.8 Million value of the safety worker’s pension we have $1,800,000 = 13 x P, and solving for P, we have P= $1,800,000/13 = $138,462. This Private Sector non-COLA-increased annual pension of $138,462 can be looked at as being mathematically equivalent to an otherwise identical pension starting at $100,000 that includes 3% annual COLA increases (i.e., the Safety worker’s pension).

    Now since we know the annual Private Sector worker’s annual pension “P”, we can plug it into my above formula of P = (FAS x 30 x .0125) x 0.72 to solve for FAS. Doing so we have, $138,462 = (FAS x 30 x .0125) x 0.72, from which

    FAS = $138,462/(30 x 0.0125 x 0.72) = $512,822

    What this shows is that a Private Sector worker (with a TYPICAL DB pension formula and provisions) would need to have a final average salary of $512,812 to generate a pension from his/her employer with the SAME $1.8 Million “value” as the TYPICAL Safety worker pension …. or $512,822/$111,111 = 4.62 times the Safety worker’s salary.

    And for the skeptics that say …. this can’t be correct …. we can just reverse the order of calculations and SHOW that this $512,822 PRIVATE Sector salary is indeed necessary to generate a pension with a “value” equal to that (the $1.8 Million) of the Public Sector Safety worker … as follows:

    (a) Private Sector worker’s Annual (non-COLA-increased) pension = $512,822 x 30 x 0.0125 x .72 = $138,462
    (b) Lump sum value (using the 13 times life annuity factor applicable to non-COLA-increased pensions) = $138.462 x 13 = $1.8 Million

    While most reasonable people would suggest that (give the nature of the occupations) Safety workers should receive pensions equivalent to Private Sector workers with salaries say 10% or 25% or 50% greater than they, I find it incredulous to believe that ANYONE would feel it appropriate to provide the TYPICAL CA Safety worker retiree with a pension equivalent to that of the Private Sector worker making over $500,000 annually. Taxpayers (who pay for all but the 10-20% of Total Coat Public Sector pensions typically paid for by the worker’s own contributions and the investment earnings thereon) simply cannot afford anything even remotely close to this level of generosity.

    And to preemptively address the anticipated comeback ………… the 4.62 times greater CA safety pension is NOT a function of the Officer’s final pay. It would remain 4.62% even if the officer’s final pay (and hence starting pension) were 10%, 20% or even 50% lower.

    The 4.62 time greater CA Safety worker pension results from the MUCH richer Formula and MUCH more generous “provisions” as follows:

    (1) Benefit from the richer “formula” of 3% vs 1.25% = 3.00/1.25= 2.40 greater
    (2) Benefit from only the CA safety worker getting COLA increases = 18/13 = 1.3846
    (3) Benefit from no CA Safety worker pension reduction for full (unreduced) retirement at age 55 = 1.00/0.72 = 1.3889

    The above beneficial ratios are multiplicative, giving the overall advantage of 2.40 x 1.3846 x 1.3889 = 4.62 times.

  17. Tough Love Says:

    MORE poison/BS from CalPERS:

    The following is the list of 11 CalPERS just-published Pension Beliefs, followed by my thoughts as to some serious shortcomings:

    ——————————————————————————————
    CalPERS Pension Beliefs:

    1. A retirement system must meet the needs of members and employers to be successful.

    2. Plan design should ensure that lifetime retirement benefits reflect each employee’s years of service, age and earnings and are adequate for full-career employees.

    3. Inadequate financial preparation for retirement is a growing national concern; therefore, all employees should have effective means to pursue retirement security.

    4. A retirement plan should include a defined benefit component, have professionally managed funds with a long-term horizon, and incorporate pooled investments and pooled risks.

    5. Funding policies should be applied in a fair, consistent manner, accommodate investment return fluctuations and support rate stability.

    6. Pension benefits are deferred compensation and the responsibility for appropriate funding should be shared between employers and employees.

    7.Retirement system decisions must give precedence to the fiduciary duty owed to members but should also consider the interests of other stakeholders.

    8. Trustees, administrators and all other fiduciaries are accountable for their actions, and must transparently perform their duties to the highest ethical
    standards.

    9. Sound understanding and deployment of enterprise-wide risk management is essential to the ongoing success of a retirement system.

    10. A retirement system should offer innovative and flexible financial education that meets the needs of members and employers.

    11. As a leader, CalPERS should advocate for retirement security for America’s workers and for the value of defined benefit plans.

    ——————————————————————————————

    And my thoughts:

    On #1 …… how about meeting the reasonable ability of Taxpayers to fund these “needs” of Public Sector employees, and how about the “needs” of the employees not being assumed to greater than those of the Taxpayers expected to pay for 80-90% of total Public Sector pension costs (as is the structure today)?

    On #2 … are you saying that lifetime retirement benefits should be adequate for full-career employees WITHOUT the employee supplementing their taxpayer-funded pensions with material personal savings? If so, why is that fair to taxpayers who must save and invest mightily (out of each net paycheck) if they are to have any reasonable retirement ? Why do virtually ALL Public Sector Plans replace 50-90% of final pay for full career workers (and with COLA increases that increase the pension’s value by an additional 25-40%) when even the BEST Private Sector pensions RARELY replace more than 40-50% of final average pay (with NO COLAs and with payouts typically starting 5 years later)?

    On #6 …. Yes, the responsibility for appropriate funding should be “shared” between employers (meaning the Taxpayers) and employees, but in what proportions for the Taxpayer and the Employee; 50/50, 60/40, 70/30, 80/20, something else? If appropriate assumptions are used (ala what Moody’s now uses) and the promised pension are fully funded over the workers careers (and not deferred for future generations to pay for), the Taxpayers’ share TODAY is 80-90% of Total Plan costs. Why is that fair to Taxpayers ?

    On #7 … I noticed that guidance #7 say that the Retirement system decisions “MUST” give precedence to the fiduciary duty owed to members but should also “CONSIDER” the interests of other stakeholders. Well, with Taxpayer footing 80-90% of Total Plan costs, I think the Taxpayers deserve quite a bit more say than their needs just being “CONSIDERED”.

  18. SeeSaw Says:

    LOL! LOL! LOL! Give it a rest–before you go completely insane!

  19. SDouglas47 Says:

    “And to preemptively address the anticipated comeback …”

    Sorry, TL math is still a waste of bandwidth.

    GIGO

  20. Captain Says:

    SeeSaw Says: LOL! LOL! LOL! Give it a rest–before you go completely insane!”

    SeeSaw, your response is typical of an individual unable to comprehend basic math, fairness, or even the 11 points contained in the “CalPERS Pension Beliefs”. You’re only concern, as a paid union member, is to discredit any and all valid arguments that oppose the Public Employee Union, Ponzi-Scheme – no matter how silly or feeble the argument. Your above statement is childish and lacking both substance and ANY supporting arguments, while ignoring CalPERS own claims. And what does “LOL” really mean?

    At the risk of sounding redundant, SeeSaw, what “LOL” actually means IS that you don‘t have an intelligent response to a valid mathematical argument. If you do I’ve never seen it.

    You can care less, SeeSaw, that Public Employee Union Members are currently receiving much more than originally promised in terms of reduced retirement ages (That Costs Money) which increase both the pension & retiree medical benefit costs (More Money), in benefit formulas which are costing taxpayers a fortune and driving cities into Service-Insolvency and even Bankruptcy (BILLIONS OF DOLLARS every year MORE MONEY).

    SDouglas47 doesn’t seem to have much, if anything, to say either.

  21. Captain Says:

    TL, I agree completely with your following comments:

    On #1 …… how about meeting the reasonable ability of Taxpayers to fund these “needs” of Public Sector employees, and how about the “needs” of the employees not being assumed to greater than those of the Taxpayers expected to pay for 80-90% of total Public Sector pension costs (as is the structure today)?

    On #2 … are you saying that lifetime retirement benefits should be adequate for full-career employees WITHOUT the employee supplementing their taxpayer-funded pensions with material personal savings? If so, why is that fair to taxpayers who must save and invest mightily (out of each net paycheck) if they are to have any reasonable retirement ? Why do virtually ALL Public Sector Plans replace 50-90% of final pay for full career workers (and with COLA increases that increase the pension’s value by an additional 25-40%) when even the BEST Private Sector pensions RARELY replace more than 40-50% of final average pay (with NO COLAs and with payouts typically starting 5 years later)?

    On #6 …. Yes, the responsibility for appropriate funding should be “shared” between employers (meaning the Taxpayers) and employees, but in what proportions for the Taxpayer and the Employee; 50/50, 60/40, 70/30, 80/20, something else? If appropriate assumptions are used (ala what Moody’s now uses) and the promised pension are fully funded over the workers careers (and not deferred for future generations to pay for), the Taxpayers’ share TODAY is 80-90% of Total Plan costs. Why is that fair to Taxpayers ?

    On #7 … I noticed that guidance #7 say that the Retirement system decisions “MUST” give precedence to the fiduciary duty owed to members but should also “CONSIDER” the interests of other stakeholders. Well, with Taxpayer footing 80-90% of Total Plan costs, I think the Taxpayers deserve quite a bit more say than their needs just being “CONSIDERED”.

    I like to think that CalPERS Management is sending the PUBLIC a message that they disagree with the Public Employee Unions Control of the organization, and if things are to change the Constitution of the Board of Administration needs to CHANGE. In other words – Ron Seeling, CalPERS Chief Actuary in 2009, isn’t the only one that was Fed-Up. According to this 2013 article by Dan Pellissier (CalPERS board must restore fiscal responsibility):

    http://www.contracostatimes.com/ci_23006339/calpers-board-must-restore-fiscal-responsibility

    “Things got so bad that by 2009, CalPERS’ then-head actuary Ron Seeling publicly described the true cost of CalPERS benefits as “unsustainable” and quietly retired shortly thereafter.”

    After the statement was made by Mr. Seeling, and according to CalPERS, Mr. Seeling was not available for interviews. We can all speculate on the arrangement made between the two party’s but CaPERS message was clear: you can’t talk to Ron Seeling – and Ron Seeling can‘t talk to the media. Nobody has ever quoted/heard from Ron Seeling after he made his statements.

    The Ron Seeling quote:

    “I don’t want to sugarcoat anything,” Seeling said as he neared the end of his comments. “We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else’s — unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) … unsustainable pension costs. We’ve got to find some other solutions.”

    https://calpensions.com/2009/08/10/calpers-actuary-pension-costs-unsustainable/

    It may be wishful thinking on my part, and CalPERS and the Unions have many political allies in Sacramento, but I get the sense that many in CalPERS would welcome a change in leadership. There are many smart people working for CalPERS and it’s very doubtful Ron Seeling is the only one …

  22. SDouglas47 Says:

    O Captain! My Captain!

    There is nothing wrong with TL math per se. The problem is the misleading assumptions upon which the calculations are based.

    Comparing pensions only, outside the consideration of “total compensation”, is meaningless.

    If two *equivalent workers* each have a TOTAL COMPENSATION of $50,000 per year, and the public sector worker has twenty five percent deferred for retirement, while the private sector worker has only six percent deferred, the pension of the public sector worker will be much larger. And his ” take home” pay, while he is working, will be much smaller, for doing equivalent work.

    That’s why it’s called DEFERRED compensation.

  23. SeeSaw Says:

    I will just keep telling you, Captain–I am not a union member and when I was an active employee who belonged to an employee association, that association membership had no connection in any way, with my membership in CalPERS.

    I do not have to do any math regarding the pension calculations. There are investment managers and actuaries in CalPERS to do that.

    Seeling was the actuary that set up the smoothing policy for CalPERS before he retired . That was about eight years ago, Captain. Talk about redundancy!

    TL and Captain–two pots meeting their kettles. LOL!

  24. Tough Love Says:

    Well SDouglas47, IF Public Sector worker “Total Compensation” (cash pay plus active-worker healthcare subsidies plus pension accruals plus retiree healthcare accruals) were indeed MATERIALLY lower than those of Comparable Private Sector workers, then the FAR FAR FAR greater PUBLIC pensions and benefits “might” be offsetting.

    While (per the US gov’t BLS), cash pay is higher in the Private Sector for certain high level professional occupation … doctors, lawyers, certain IT professionals, that’s not the case for the other 90+% of all Public Sector occupations.

    Your argument is simply false and a rather poor attempt to justify the unnecessary, unsustainable, unfair (to Taxpayers), and grossly excessive pensions & benefits granted Public Sector workers everywhere.

  25. SeeSaw Says:

    CalPERS pensions are calculated on base salary–not on “total compensation”.

  26. Tough Love Says:

    See Saw, I’m aware of that.

    Perhaps the confusion was in the 1-st paragraph in my last comment, which SHOULD HAVE said ….

    “IF Public Sector worker “Cash Pay” were indeed MATERIALLY lower than those of Comparable Private Sector workers, then the FAR FAR FAR greater PUBLIC pensions and benefits “might” be offsetting, and yield equal Public/Private Sector “Total Compensation” (cash pay plus active-worker healthcare subsidies plus pension accruals plus retiree healthcare accruals).”

    The balance of my comment was accurate …. in 90+% of occupations that situation does NOT Exist ……. with Public Sector cash pay equal or greater and ALL Public Sector pensions & benefits ALWAYS FAR FAR FAR greater.

  27. SDouglas47 Says:

    ” cash pay is higher in the Private Sector for certain high level professional occupation … doctors, lawyers, certain IT professionals, ”

    Make that “cash pay is MUCH HIGHER in the private sector for certain high level occupations”
    ……………..
    TL says: ” in 90+% of occupations that situation does NOT Exist ……. with Public Sector cash pay equal or greater ”

    The Heritage Foundation (and most other studies) says ” After controlling for observable skills and a detailed list of personal characteristics, state workers in California earn about 10.2 percent less in wages than private-sector workers.”

    Who are we to believe????

  28. Tough Love Says:

    SDouglas47 … how about identifying these …”most other studies”.

    And how about Police compensation comparison in my mathematical demonstration above, to which you agreed by saying …”There is nothing wrong with TL math per se”.

    Where I live, Police Officers with just 7 years service all make over $100K in Base cash pay. They wouldn’t make anywhere near that in the Private Sector …. and (per my demonstration), their pensions are MULTIPLES greater…. and with retiree healthcare promises (worth an ADDITIONAL $250K-$400K for family coverage) that no one in the Private Sector gets any longer.

    There is simply ZERO justification for this unnecessary & unjust financial “mugging” of the taxpayers.

  29. SDouglas47 Says:

    Roughly equal

    http://slge.org/publications/comparing-compensation-state-local-versus-private-sector-workers

  30. SDouglas47 Says:

    https://www.google.com/url?sa=t&source=web&rct=j&ei=ZfyDU5ipEdH6oASrh4H4Bw&url=http://crr.bc.edu/wp-content/uploads/2011/09/slp_20-508.pdf&cd=7&ved=0CDwQFjAG&usg=AFQjCNFzRRCyttEMXyJMBEL7jSh7WPaqiA&sig2=dQm8vDzj0ZzIRClvo0irJA
    ………………………………..
    http://www.epi.org/publication/getting_the_facts_straight_about_state_and_local_pay/

    Heywood and Bender (2010) find that “• Wages and salaries of state and local employees are lower than those for private-sector workers with comparable earnings determinants (e.g., education). State employees typically earn 11% less; local workers earn 12% less.” 

    Keefe (2011) finds that “On average, full-time state and local employees are undercompensated by 3.7%, in comparison to otherwise similar private-sector workers. 

    Schmitt (2010) finds that “When state and local government employees are compared to private-sector workers with similar characteristics—particularly when workers are matched by age and education—state and local workers actually earn 4% less, on average, than their private-sector counterparts. 
    ……………….
    There is really no argument on the cash pay deficiency. The argument is on how benefits are valued.

  31. SDouglas47 Says:

    You seem to have a morbid preoccupation with police salaries. We’ve mentioned this before. In California, many safety workers in the last ten years got raises of as much as thirty percent over CPI. The question remains, are they overpaid now, or were they underpaid before?

    Your opinion is obvious.

    Dr. Joshua Rauh says
    ” Attempting to benchmark the compensation of, say, public safety officials to private sector employees is obviously problematic. In such a case, the appropriate level of pay is simply whatever the employers and employees can agree upon”

    Fair and balanced….. He says this only works if there is transparency in the cost of benefits, which he says does not exist.
    ……………………….
    Also, interestingly, he says, on public/private pay:

    ” Essentially everyone who looked at the data found that public sector workers on average have slightly lower salaries. The contention was over whether higher public sector benefits more than offset this wage differential in total compensation.”
    ………………
    And, last but not least, for you Powerful Public Employee Union fanatics:

    ” A related question at the conference was whether public sector collective bargaining and public sector unionization actually succeed in raising compensation. Here there was in fact no conclusive evidence.”

    http://kelloggfinance.wordpress.com/2011/10/16/government-unions-and-public-sector-compensation/

  32. SDouglas47 Says:

    $400,000 retiree healthcare is difficult to believe. It is certainly not typical.

    (That’s what we realists call an understatement.)

  33. SDouglas47 Says:

    Actually, in California at least, $250,000 is a big stretch. I highly suspect it would be an outlier in New Jersey, too.

  34. Tough Love Says:

    SDouglas47,

    While I don’t really accept your conclusions without considering offsetting studies that go the other way, for arguments sake, lets say I accept your 3 studies with cash pay11%, 3.7% and 4% higher for Private Sector workers. That averages to 6.2% higher.

    Now let compare that Private Sector cash pay advantage to the greater pensions and benefits of Public Sector workers.

    For pensions, Private Sector workers typically get their employer’s 6.2% of pay SS contribution on their behalf plus a 3% of pay “match” into a 401K Plan, totaling 9.2% of pay. Now let’s see what Public Sector workers typically get …

    Since nationally just about 75% of all Public Sector workers participate in SS, lets assume on average they get a 0.75 x 6.2% = 4.65% of pay taxpayer contribution into SS. And to fully fund a typical COLA-increased non-safety worker pension over their working career (using assumptions consistent with what Moody’s now uses) requires a level annual total contribution of 25-35% of pay. Subtracting about 5% for employee contributions leaves on average about 25% of pay for Taxpayers to fund. Adding back in the SS contribution of 4.65%, brings the taxpayer contribution to 29.65%.

    Subtracting from that 29.65% Public Sector (non-safety) pension TAXPAYER cost, the average 9.2% employer contribution for Private Sector workers, leaves non-safety Public Sector workers with a net PENSION advantage of about 29.6%-9.2%= 20.4% of pay. So even if we deduct your theoretical 6.2% private Sector cash pay advantage, that still leaves non-safety Public Sector workers with a net “Cash Pay + Pension” advantage of 20.4%-6.2%- 14.2% of pay. And with the much richer Safety worker pensions typically costing an ADDITIONAL 15%-20% of pay (ABOVE that of non-safety workers) to fully fund over their careers, their “Cash Pay + Pension” advantage is over 30%.

    And while I can’t find the link right now, one study estimated the cost of Public Sector retiree healthcare at a level annual 12% of pay. Since Private sector workers RARELY get this any longer, that 12% should be added to the above 14.2% and 30% giving “Total Compensation” advantages of over 25% for non-safety workers, and over 40% for safety workers.

    That’s called a proper analysis.

  35. SDouglas47 Says:

    More assumptions, more math.

    For starters, the 3.7% difference in the Keefe study was total compensation, the cash pay difference in that study was 11.8%.

    But don’t let that slow you down. You just keep whipping those numbers till you come up with the answers you want.

    For the most part, INCLUDING THE COST OF PENSIONS AND HEALTHCARE, public and private workers are *roughly equal*
    Some individuals will always make a little more than you, some will make less. That’s life. Get over it. You’re beating a dead horse. Tilting at windmills. It’s not good for your health.

    It’s true, cops make more than I do. I can live with that. My mechanic makes more than I do. I’m pretty sure that, with tips, the waitress at my favorite restaurant makes more than I do.

  36. Tough Love Says:

    SDouglas47,

    Since I knew you wouldn’t believe me, I tracked down my source for Public Sector retiree heathcare being worth a level annual 12% of pay (see the next-to-last paragraph in link below),

    And guess what … it was from a study by none other than CalPERS own actuaries.

    http://www.publicceo.com/2014/02/resolving-one-debate-on-public-sector-pay/

  37. Captain Says:

    SDouglas47 Says:”$400,000 retiree healthcare is difficult to believe. It is certainly not typical.”

    SDouglas, unfortunately retiree healthcare costs of 400K is both very typical and also understated. Most of our California Cities, Counties, and Special Districts have been providing lifetime retiree medical benefits (for the entire family) for FIVE years of service. That’s right – Lifetime Medical Benefits for FIVE years of work, and that’s in addition to Wages and Pension costs.

    The current retiree cost of medical benefits for an employee +1 (husband & wife) is $1323 per month, and the family plan (employee plus two or more) costs $1720 per month. Those are 2014 rates for the CalPERS Kaiser plan. You can do the math.

  38. SeeSaw Says:

    Most? Name them! My former municipal emloyer requires 25 years full-time service to qualify for a stipend of $532/mo–no coverage for dependents. The ABC premium, which acts only as secondary to Medicare is $1,000/mo. My out-of-pocket cost for those premiums for me and my spouse is $1460 month. Your post is a crock of BS, Captain!

  39. Tough Love Says:

    Captain,

    In my earlier comment (on Police Officer retirements) I said … “with retiree healthcare promises (worth an ADDITIONAL $250K-$400K for family coverage”

    The reference to Police Officers was relevant due to their very young retirement ages.

    Lets assume family average, retiring at age 55, using your cost-figure of $!,720/mo for family coverage and work up total costs for retirement periods of 10, 15, 20, 25, and 30 years …noting that without Social Security (and hence eligibility for Medicare) the FULL Cost (less any share paid by the retiree directly) falls on the Taxpayers.

    With $1720/mo in the 1-st year, we should assume MINIMUM of 6% annual increases (since medical care inflation is always 2-3 times that of total inflation).

    So we have (12×1720) + (12x1720x1.06) + (12x1720x1.06^2) +(12x1720x1.06^3) ……. etc.

    When I originally estimated $250-$400K, I was thinking that Medicare would kick in at age 65, picking up 3/4 of the cost. Without Medicare, it’s a LOT higher. I dropped the above formula into a spreadsheet. The following are the total costs for retirements of 10, 15, 20, 25, and 3 years respectively: $272K, $480K, $759K, $1132K, $1632K, and $2,300K.

    Obviously, children wouldn’t be covered for 30 years, but these figures show the enormity of the cost of these retiree healthcare promises that Private Sector workers DO NOT get.

  40. SeeSaw Says:

    The pot-of-gold at the end of the rainbow for the private insurance companies, when Medicare kicks in is that, “yes”, Medicare picks up 3/4 of the cost–but the insurance companies do not just keep the same premium rates for the over 65 retiree–they raise them!

  41. Tough Love Says:

    SeeSawe, And what does that have to do with, or in any way justify the TAXPAYERS perhaps paying over $1 Million in Public Sector retiree healthcare premiums (for just ONE retiree) when THEY get no such benefit from their employers ?

  42. SeeSaw Says:

    TL, there is no guarantee that life if fair. Stop your complaining! And just to remind you for the umpteenth time–I am a taxpayer–an equal to you taxpayer!!!!!

  43. Captain Says:

    SeeSaw Says: “Most? Name them! My former municipal emloyer requires 25 years full-time service to qualify for a stipend of $532/mo–no coverage for dependents.”

    Well then, Seesaw, that would make your former employer an outlier. While many cities are changing their retiree medical benefits to something resembling the state plan, which pays full healthcare benefits based on a 20 year “CAREER” (?), and a few cities have limited the benefit for new hires to employee only, most cities have been providing lifetime family medical benefits based on five years service. Change is happening but it has been slow – unfortunately the financial damage has already been done and those numbers will soon be -finally, included on the balance sheets of ALL California Cities.

    The first time I’d ever heard of this retiree healthcare benefit was in 2008. A friend of mine, working for the city of Palo Alto, told me they were continually hiring trades union persons (toward the end of their careers and already receiving pension benefits) to their Miscellaneous employee group. They would come to work for five years for the retirement medical benefits and five years worth of pensions (the vesting period for both) and then retire. He said the city was aware of the cost but nobody was willing to do anything to effect change. That equated to five years worth of pension benefits with a guaranteed “Net Return” of 7.75 percent for life, and a guaranteed lifetime medical benefit for the family (family members now include children up to age 27 – I believe).

    A typical contract clause: In the case where the employee eligible for two party coverage is deceased, the amount the city is obligated to pay is reduced by 50 percent. That means the cost, even with the 50 percent reduction, can continue well beyond the average life expectancy of the employee..

    Seesaw, Stockton is one of those cities you wanted named. So is Vallejo. You can probably add San Bernardino to the list as well. And I’ve already mentioned Palo Alto. The list is extensive. When one city bargaining group gets away with something they all learn about it and all strive for the same benefits. That’s how it works.

    I may have made an error when including the county plans in my statement that “most” use a five year vesting period for retiree medical benefits. Actually, most County Pension Plans are SKIMMING MONEY from the what County Pension Plans call “Excess Earnings“. Of course Excess Earnings, in the form of 100 PERCENT Funding, hasn’t occurred in over a decade – but that hasn’t stopped the UNIONS from SKIMMING as much as 40 percent from their own pension plan, even those which are only 60 percent funded, and then DIVERTING those TAXPAYER DOLLARS toward their own UNION retiree medical benefits. It is OTRAGEOUS behavior on the part of the UNIONS and it continues to this day.

  44. Captain Says:

    “Tough Love Says: “In my earlier comment (on Police Officer retirements) I said … “with retiree healthcare promises (worth an ADDITIONAL $250K-$400K for family coverage …The reference to Police Officers was relevant due to their very young retirement ages.

    When I originally estimated $250-$400K, I was thinking that Medicare would kick in at age 65, picking up 3/4 of the cost. Without Medicare, it’s a LOT higher.”

    Tough Love, it’s possible I’ve steered you wrong. The California public employee unions do pay into Medicare (1.45% from the city and 1.45% from the employees). I’m sure there’s a cost offset for medical benefits once the employee becomes Medicare eligible but I’m not sure of the value.

    **One city I’m aware of – the city of CHICO, is paying both the employer and employee share of Medicare. While that should be illegal IMO, I guess it provides a means for local politicians to increase employee compensation outside of the public’s awareness while also claiming they’ve limited employee raises. It Stinks! I bring it up because I consider it very disgusting**

    What I am sure of is that the lowering of retirement ages by five years has had a significant impact on the number of years that cities are paying the full cost of retirement benefits (pre-Medicare eligible benefits that begin at age 65). And since few cities have pre-funded retiree healthcare costs the expense is mostly Pay-As-You-Go.

    As you know the retiree medical expenses are almost as troubling/destructive as the unfunded pension liabilities.

  45. Captain Says:

    SDouglas47 Says: “Roughly equal

    http://slge.org/publications/comparing-compensation-state-local-versus-private-sector-workers

    SDouglas, your linked report fails to account for retiree medical costs/benefits which are mostly earned over a five year period, while discounting those costs over a career. The link you’ve provided also only accounts for the “NORMAL COST” of pension benefits. Unfortunately the “Normal Cost” of pension benefits, at least in California, only represents a small fraction of the actual cost. And that cost is going up an additional 25-50 percent, at a minimum.

  46. Tough Love Says:

    SeeSaw, And as I’ve said umpteenth times, with Public Sector workers rarely earning less in “cash pay” than their Private Sector counterparts (and in many cases MORE), there is ZERO justification for Taxpayer-funding of ANY greater pensions or better benefits let alone the MULTIPLES GREATER ones that are typical today EVERYWHERE.

  47. Tough Love Says:

    Captain, Not sure if you missed my above comment time-stamped … May 27, 2014 at 3:17 pm.

    Per a study from CalPER’s own actuaries, the cost of providing Public Sector retiree healthcare comes to a level annual 12% of pay….. vs generally ZERO for employer-provided retiree healthcare coverage for Private Sector workers.

    That advantage ALONE is far greater than the much SMALLER (3-4%) “cash pay” advantage for Private Sector workers that some studies suggest ….. thus negating ALL arguments for ANY greater Public Sector pensions, let alone the multiples-greater Public Sector pensions typical everywhere today.

  48. Captain Says:

    TL, thanks for directing me to your previous comment. I don’t see where the study is attributed to CalPERS, but clearly the cost of providing lifetime retiree medical benefits is ridiculously expensive, and raises the public employee compensation substantially.

    Here is what stood out to me about your link:

    “Luckily, California and other public employers are required to calculate and disclose what’s called the “normal cost,” which represents the value of the future retiree health benefits accruing to employees today. California’s actuaries calculate that in 2011 state employees earned around $2.2 billion in future retiree health benefits and their total wages were around $18.01 billion. So those benefits are worth around an extra 12% in wages. This is compensation that private sector workers rarely receive. And–perhaps more importantly–can’t really understand as they debate how to set public employee pay.”

    I’ll repeat a specific point: “California and other public employers are required to calculate and disclose what’s called the “normal cost,” which represents the value of the future retiree health benefits accruing to employees today.”

    – It appears to me that even the 12% understates the true cost of lifetime retiree medical benefits for two reasons:

    1) They are only talking about the “normal cost”. The normal cost of pensions for public safety, for the employer/taxpayer, is about 17% of payroll. The actual cost for the employer/taxpayer, today, before the projected 50% increase which is coming very soon, is 35-50% of payroll. And I’m pretty sure the “normal cost” of retiree medical benefits is both understated and unfunded.

    2) When you provide the lifetime medical benefit for five years work, even if people work thirty years, you just can’t calculate the cost in the same way pensions are calculated. What is the percent of wages this benefit is worth when an employee earns it over only five years? It could be more costly than the salary, couldn’t it? I think so.

    It is significantly greater than 12%!!!!

    Even if CalPERS were to have provided the data I wouldn’t consider it reliable.

    CalPERS is CROOKED! The CalPERS Board of Administration is CORRUPT!

  49. Captain Says:

    TL, I’d like your opinion on the following: Judge hands CalPERS 1st-round loss in long-term care lawsuit

    By Jon Ortiz
    jortiz@sacbee.com

    “CalPERS can be sued for allegedly mishandling its privately-funded long-term care insurance program, a Los Angeles court has tentatively ruled, clearing the way for a trial…

    The Los Angeles Superior Court complaint, if granted class-action status, would represent about 150,000 CalPERS members who purchased long-term care insurance between 1995 and 2004 to cover convalescent care, in-home living assistance and similar services. Nearly all the policies guaranteed inflation-adjusted payments for the life of the policyholders, many of whom believed their premiums would never be increased.

    CalPERS stopped selling the so-called “lifetime, inflation-protected” policies a decade ago. It incrementally raised premiums on existing policyholders because the program was going broke. Officials have blamed under-performing investments, underpriced policies and higher-than-expected payouts for the trouble.”

    Doesn’t that sound just like the CalPERS PENSION PLAN problems?

    Apparently the CalPERS members don’t like being treated like ordinary TAXPAYERS. If the CalPERS members prevail in this lawsuit who will pay the cost? I think we both know the answer. I can’t help but wonder if CalPERS will even put up an argument. I doubt it – they seem programmed to saddle ALL their financial boondoggles on the backs of the middle-class taxpayers. It’s just what they do.

    Besides, CalPERS is spending their UNLIMITED legal budget in Stockton, San Bernardino, and most importantly, in CalPERS opinion, Detroit. Detroit & San Bernardino seem to be the California Pension funds biggest concerns. Detroit being the biggest concern.

    Read more here: http://www.sacbee.com/2014/05/29/6442641/judge-hands-calpers-1st-round.html#storylink=cpy

    CalPERS is CROOKED! The CalPERS Board of Administration is CORRUPT!

  50. Captain Says:

    Mr. Mendel reports: New step to expose hidden retiree health debt

    “State worker retiree health care is unusually generous. A 12-point pension reform plan issued by Gov. Brown in 2011 mentioned “the anomaly of retirees paying less for health care premiums than current employees.”

    The state pays 100 percent of the premium of the retiree (the average of several large plans) and 90 percent of dependent premiums. For active workers, the state usually pays 80 or 85 percent of the worker premium and 80 percent of dependent premiums.”

    https://calpensions.com/2014/06/02/new-step-to-expose-hidden-retiree-health-debt/

    I don’t believe I need to add anything.

  51. Tough Love Says:

    Captain, I brought up that CalPERS LTC lawsuit issue in a comment to you a few weeks ago. Interestingly LTC was a benefit VOLUNTARILY purchased by participants with the Plan structured with NO TAXPAYER-FUNDING and Plan costs fully the obligation of those who bought it.

    But as I mentioned in my initial comment to you, CURRENT premiums (which the insureds are suing NOT to have raised) simply CANNOT cover developing benefits (which the insureds do not want lowered). So, if the insured win the lawsuit (perhaps after appeals), where can the additional revenue come from? CalPERS has only one source of revenue (besides dedicated pension payments and investment income earned on those payments), the Taxpayers.

    The conundrum is that the Taxpayer are (in this case) VERY CLEARLY not part of the contractual arrangement so tolling them for the additional revenue seems legally without merit.

    My guess is that if a group supporting Taxpayer-rights puts up a fight NOT to pay for CalPERS underpricing, CalPERS may “negotiate” a deal with the State (outside of CalPERS) to provide the additional funding..

    Bottom line …. the Taxpayers get screwed anyway, just via additional taxes to support an additional State (instead of CalPERS) expense….. and the Public Sector insureds again get way with something that they could never get away with in the Private Sector.

    A PRIVATE Sector insurer would put up a ferocious legal battle falling on the legal contract wording …. that premium rates are NOT guaranteed.

    In the Public Sector world of give-aways (at taxpayer expense) why put up a big fight that only hurts their employees and membership? That’s the PUBLIC Sector employer and CalPERS mentality.

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