California Gov. Jerry Brown's proposal to implement a hybrid pension plan for new state and local employees would lead to insignificant savings for the state and in some cases, “cost increases for some plans may offset cost savings,” according to an actuarial cost analysis conducted by CalPERS staff.
Mr. Brown's proposal, announced Oct. 27, would create a new pension plan with elements of both a defined benefit plan and defined contribution plan; he said the state would save $900 million a year and that similar savings could be achieved by municipalities.
However, staff at the $229.6 billion California Public Employees' Retirement System, Sacramento, said that the savings would not be significant but did not provide a dollar amount.
CalPERS' analysis also showed that the hybrid plan would shift risk to employees from employers. Employees would see an increase in risk since the DC portion of their benefit would be exposed to investment volatility.
Also, total retirement benefits for most members would be lower under the hybrid plan, according to CalPERS.
A copy of the analysis, prepared at the request of the Legislative Conference Committee on Public Employee Pensions, is available on the CalPERS website.