California Governor Jerry Brown (D) is urging CalPERS officals increase the contribution rates it requires from states, cities and employers to account for the costs associated with the increasing life span of retirees.
Brown sent a letter to the board that oversees CalPERS, the second largest public pension system in the United States, asking that the board members incorporate longer life spans of retirees into the formula used to calculate the rates of taxpayer contributions to the fund.
The CalPERS board is meeting later this month and is expected to vote on the proposal. CalPERS staff had recommended in December that contribution rates be increased, but not until 2016.
But Brown said in his letter that waiting until 2016 could cost the state $3.7 billion over the next 20 years.
From Gov. Brown’s letter:
“Since CalPERS last faced this issue in 2010, there have been dramatic changes in life expectancy: by 2028, men retiring at age 55 are projected to live an average of 2.1 years longer and women 1.6 years longer. For the state, these changes mean that pension costs will be much greater than previously thought and state costs will increase $1.2 billion annually – about 32 percent greater than today.”
CalPERS released their own statement today in response to Gov. Brown’s letter.
“We appreciate the Governor’s attention to this important matter,” the statement read. “We share a mutual goal to ensure that our fund is financially sound for the long-term.”