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California'S Public Employees' Pension Reform Act: Are Public Pension Plans On The Path To Stability?
California enhanced the public pension plans it provides its employees at the end of the twentieth century without dedicating additional funding for those enhancements. When these pension plans began to experience significant underfunding after two economic downturns in the 2000’s, which were exasperated by these enhancements, the governor and legislature began to look into how to stem the funding crisis of these plans. With underfunding projected to grow significantly, the governor and legislature acted promptly to pass the Public Employees’ Pension Reform Act (PEPRA) of 2013. The intent of PEPRA was to stabilize pension plans by changing the formulaic calculation for new employees hired in the wake of this new law. By increasing the contribution rates, lengthening the age and years of services needed to retire, reducing the types of compensation to be used in calculating their retirement, and enacting more aggressive actuarial assumptions, the expectation was that pension costs would be reduced. The focus of this study will be to determine if the changes enacted with the passage of PEPERA have materialized in meaningful improvements to pension plan funding levels thereby alleviating the cost to public agencies so they can provide the mandated social services that taxpayers expect and need.