California’s public employee pension system, designed in the last century, is woefully in need of an update. The current plan rests on promises made to employees for their retirement that cannot be fulfilled with the money that the state has so far set aside.
Taxpayers are already on the hook for tens of billions of dollars for these unfunded liabilities, with the potential that the entire system could collapse if future investment earnings don’t match projections. The state’s scramble to close that gap with ever-bigger payments to the retirement fund is crowding out funding for education, health care, public safety and other crucial services.
But there is another, hidden problem with the current system. It represents a transfer of wealth from younger, shorter-term employees to older workers who spend their entire careers working for the state. And in an age when millennials increasingly plan to work for more than one employer during their career, that’s an inequity that we should fix.
I have introduced legislation, Senate Bill 1149, that tackles both these problems with a modest proposal that would be good for the state, for employees and for the taxpayers.
My bill would offer a 401(k)-style retirement plan as an option for new state employees. This plan would be funded with contributions from the employee and the state. It would be controlled by the employee and fully portable, so that workers who leave before reaching retirement could re-invest the money elsewhere to keep building their nest egg until they reach retirement age.
Virtually every public employee union in the state is opposed to SB 1149, which faces its first hearing Monday in the Senate Public Employment and Retirement Committee.
But this opposition is misguided. My bill would actually be better than the current system for a majority of younger, newly hired employees these unions will represent.
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Source:: The Mercury News – Politics