SAN FRANCISCO - The California Public Employees' Retirement System, the country's largest public pension fund, voted Aug. 20 to change retirement calculations for new government hires, despite concerns about increased pension costs.
The CalPERS board voted to add nearly 100 types of extra pay that will count toward how pensions are calculated for public employees hired after Jan. 1, 2013.
Gov. Jerry Brown, who has raised concerns about "pension spiking," said following the vote that CalPERS "got it wrong."
"This vote undermines the pension reforms enacted just two years ago," Brown said in a statement. "I've asked my staff to determine what actions can be taken to protect the integrity of the Public Employees' Pension Reform Act."
Brown backed the 2012 reform law, which aims to reduce pension costs for newly hired workers. It was intended to end the practice of "pension spiking," where employees inflate their compensation in the years immediately preceding retirement in order to receive larger pensions.
PEPRA stated that pensions should be calculated on a worker's "normal monthly rate of pay, or base pay."
CalPERS said its new regulation is intended to clarify the types of pensionable compensation items under PEPRA. Under the newly approved retirement calculations, various types of incentive, educational and special assignment pay will now be deemed as pensionable income.
Ahead of the vote, Brown wrote a letter to CalPERS saying that the proposed regulation disregards the rule that pensions are based on monthly pay, and not on short-term pay increases.
The League of California Cities, an association representing most of the state's 482 cities, has also objected to the new CalPERS regulations, saying it is in possible violation of PEPRA.
"The proposed regulations contain approximately 100 categories of 'special pay' that would, in addition to base or normal pay, be defined as pensionable compensation," the league said in a statement on Tuesday. "The list is virtually identical to the categories of special pay used for pre-PEPRA, or 'classic' CalPERS employees, despite the clear direction of PEPRA that "ad hoc" categories of pay should not be pensionable."
CalPERS board member JJ Jelincic, who supported the new calculations, said workers who earn the extra pay are entitled to be compensated.
CalPERS administers health and retirement benefits for more than 3,000 public school, local agency, and state employers. The pension fund has more than 1.6 million members in its retirement system, and more than 1.3 million in its health plans.
