August 20, 2014 / 6:53 PM / 5 years ago

California Governor decries Calpers vote on pensions

LOS ANGELES (Reuters) - California Governor Jerry Brown decried a move by the state’s giant public pension fund on Wednesday to include temporary pay hikes in the way pensions are calculated for newly hired workers.

California Governor Jerry Brown adjusts his earpiece during a news conference at Memoria y Tolerancia museum in Mexico City July 28, 2014. REUTERS/Edgard Garrido

The board of the California Public Employees’ Retirement System (Calpers), America’s largest pension fund, voted to approve nearly 100 types of extra pay that will count towards pensions for workers hired since 2013.

In 2012, Brown passed a reform law, called the Public Employees’ Pension Reform Act, aimed at reducing pension payments for newly hired workers, at a time when cash-strapped California cities are straining to pay rising retirement costs.

Critics say the vote by Calpers will increase pension costs for the state, and its cities. Workers’ pensions are calculated on the total amount of their monthly income.

Although Calpers approved 99 types of extra pay that can be factored in to a worker’s income when calculating their pension, Brown only objected to one of those: allowing temporary upgrade pay to be counted as permanent, pensionable income.

Brown, a Democrat, sent a letter to Calpers last week asking them not to allow temporary upgrade pay to count toward pensions.

On Wednesday, the Calpers board rejected Brown’s opposition and voted to pass all 99 pay provisions, including that temporary pay hikes can be factored into a final pension.

“Today Calpers got it wrong,” Brown said in a statement. “This vote undermines the pension reforms enacted just two years ago. I’ve asked my staff to determine what actions can be taken to protect the integrity of the Public Employees’ Pension Reform Act.”

It is unclear what Brown can do to challenge the Calpers vote. Calpers’s members - the state, cities and districts whose pensions the fund manages - are in a contractual relationship with the pension system.

“If Calpers determines these are pensionable benefits, the only way to get out from under that is to litigate the issue,” said Karol Denniston, a California public finance attorney.

Calpers says it was acting to clarify what is pensionable income under Brown’s 2012 law. The system administers benefits for over 3,000 city, state and local agencies, or nearly 3 million people, and manages assets of $300 billion.

Reporting by Tim Reid; Editing by Bernard Orr

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