Niland faces CalPERS Pension Loss
Last updated 8/6/2017 at 9:13am
The CalPERS Board of Administration voted in March to cut the pensions of close to 200 retirees from the East San Gabriel Valley Human Services Consortium, a Southern California job training program created by the cities of Azusa, Covina, West Covina and Glendora. The agency stopped contributing to the state pension system when it folded in 2014. July 1, CalPERS sliced the pension checks for the consortium’s retirees by 63%.
Retirees of the Niland Sanitary District, could also face action, although the agency is currently negotiating with CalPERS officials to determine how much it may cost to leave the pension system.
At the center of all of these cases is the termination fee local governments must pay to CalPERS if they opt to leave the system — money that officials at the state pension system say is needed to ensure retirees receive the full pensions they were promised.
After the city of Stockton declared bankruptcy in 2012 following the nationwide recession, the federal court judge handling the case called the fee a “golden handcuff” and “poison pill” that prevents cities and other local governments from leaving CalPERS to find other options for employee pension benefits. The price tag for Stockton to pull out of CalPERS was $1.6 billion. The city chose to stay put.
If a city decides to pull out of the state pension fund, CalPERS places the municipality’s pension fund into a pool of lower-risk investments, which lowers the return rate on what that city earns. As a consequence of the reduced investment earnings, the city will have less money to pay the full pension benefits of its retirees, increasing the termination fee imposed by CalPERS to make up the shortfall.