February 3, 1997
TO: PENSION COMMITTEE No. 3-97
RE: DRAFT CalPERS ALTERNATIVE BENEFIT PLANS REPORT
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Attached is a draft report to the Board of CalPERS (the California Public Employees’ Retirement
System) on alternative benefit plans for the CalPERS retirement programs. This report recommends
possible modifications to existing programs as well as additional new programs. This report was
prompted by recent criticisms of the CalPERS program and legislation introduced in the California
legislature that would have created an optional portable retirement plan for certain State employees.
Retirement Benefits for Part-Time and Non-Career Employees
The report proposes creating a new benefit program for part-time employees who are currently
statutorily excluded from the CalPERS defined benefit plan. Specifically, the report recommends that
CalPERS design and implement a defined contribution plan to offer State, contracting public agencies
and school employers an alternative plan for part-time employees.
Portability
Under CalPERS’ current retirement program, certain participants have a ten year vesting
schedule for employer contributions to the plan. In addition, employees who withdraw any employee
contributions forfeit the entire employer-provided benefit. The report recommends that a study be
performed to determine actual mobility patterns of CalPERS workers and possible deficiencies in
portability of the defined benefit program. The report further recommends that any CalPERS plan
should conform with ERISA private sector vesting requirements, including requirements that vested
employer-provided benefits be nonforfeitable.
Second Tier Members
With regard to the Second Tier program, a noncontributory defined benefit program created in
1984, the report notes that participation levels have been low. As a result, the report urges consideration
of alternative modifications to the program, including a hybrid retirement plan and a reduction of the
vesting schedule from ten years to five.
Mandated Social Security
The report notes that all three alternatives offered by the Advisory Council on Social Security
concerning the reform of Social Security included mandating Social Security participation by State and
local government employees hired after 1997. CalPERS estimates that this requirement could cost
California nearly $3 billion and recommends that the CalPERS’ Board continue to reaffirm its opposition
to mandating Social Security coverage for state and local employees.
We will keep you informed of any further developments.
Kathryn A. Ricard
Assistant Counsel - Pension
Attachment (in .pdf format)