Posted by Jon Fleischman at 12:00 am on Oct 25, 2006 Comments Off on Arnold and Pension Reform
There is some rhetoric flying around about what the Governor was
and was not supporting by way of public employee pension reform
last year. The Governor was supporting a change in pensions that
would have shifted public sector employees from what is called a
“defined benefit” program to what is called a “defined
contribution” program. This change, which would have applied to
only new hires (all existing public employees would be
‘grandfathered’ under the current rules), would have simply moved
the methodology behind public sector retirement benifits to those
used in the private sector.
In a defined benefits system, if an employee works for a set
number of years, there is a specific formula of exactly how much
the employer (in this case, the government) would pay a retiree,
based on factors like their last salary, etc.
In a defined contributions system, the employer makes a
specified contribution each pay period, or month, or year, into a
retirement account for that employee (often times employees can
augment this amount). Then this fund (like a 401k) grows over time
resulting in an eventual retirement “nest… Read More