California Public Employees’ Retirement System: contract members: termination.
The enactment of SB 1032 could dramatically alter the landscape of public employee pensions in California. It removes the previous mandatory ride that required agencies to fully fund pension liabilities before exit. Critics argue this could undermine the stability of CalPERS and impair the benefits owed to employees from terminated contracts. Proponents believe it offers municipalities greater financial relief and latitude in turbulent economic times, allowing for potential savings and enabling them to seek alternative retirement options that may be more financially viable.
Senate Bill 1032, introduced by Senator Moorlach, seeks to amend the regulations governing the California Public Employees Retirement System (CalPERS) related to contract members and the terms under which public agencies can terminate their contracts. The bill allows public agencies to terminate their contracts with CalPERS at will, without the preceding requirement of achieving a funded status of 100% plus an additional 7% for mortality fluctuations. This represents a significant shift in policy, making it easier for agencies in financial distress to exit the pension system and manage their liabilities more flexibly.
Debate surrounding SB 1032 has included sharp divisions between supporters and opponents. Supporters laud the bill for recognizing the fiscal hardships many local governments face and assert that it gives them necessary autonomy to make decisions in the best interests of their communities. Conversely, critics, including some labor organizations, express fears that the bill might jeopardize the pensions of public employees, suggesting it could shift the burden onto employees and retirees who would have to absorb potentially reduced pension benefits as a result of the unfunded liabilities left in the terminated agency pool.