Summary of Responses to Question: “If Cal Pers “ran out of money,” who would be responsible for
retiree benefit costs?”
The employer. It is their plan. Don’t have the cite for you though.
Richard H. Averett, Executive Director/CFO
Local and Regional Government Services Authorities
raverett@rgs.ca.gov 831.308.1508
This is not an far fetch concern as I have also been thinking about it. CALPERS is the counterpart of the
SSS in the Public Sector.
CALPERS was created after the voters approved a constitutional amendment authorizing legislation to
establish a pension system for State employees in Jan 1,1932. Employees and employers both
contribute to the plan. This pool of monies is invested into securities, investment pools, foreign
currencies and among them subprime residential mortgage-backed securities. (refer to the Financial
statements as at June 30, 2007). These pool of monies is what pays for the current benefits that are
due. An actuarial is made annually to determine if there is enough assets to accommodate the benefits
due at a certain given period for each member depending on the rate of benefit offered to its
employees. . If the monies in the pool is determined to be not sufficient, an assessment is made to the
member. Such is the case of the “Unfunded liabilities” now facing several cities who even have to
result to issuing bonds just to pay for this type of liabilities. PERS rely on their investments earning also
to determine its ability to pay for future benefits from the monies entrusted to it. To answer your
question, I believe that the member agencies will be assessed to cover any shortfall in meeting its
pension benefit obligations.
Mellie D. Deano
Finance Manager
City of Cudahy
323-773-5143 ext 225
While this may not completely answer your question, it should calm fears. Ultimately you will pay for it
over time if your employer rate goes up. However, there is not much chance people will not get their
retirement checks. If it ever comes to that your agency and rate payers probably won’t have any money
either.http://www.calpers.ca.gov/index.jsp?bc=/about/press/news/invest-corp/calpers-responds-tomarket-turmoil.xml
Thanks,
Michael Demaree
Finance Director – South Orange County Wastewater Authority
Back to the employer.
"McDonnell, Paul" PMCDONEL@co.riverside.ca.us
Hi, Amy,
My guess is that CalPers would raise the contributions rates on the contributors (cities, counties, special
districts).
Susan Slayton
Administrative Services Director
City of Morro Bay
sslayton@morro-bay.ca.us
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I don’t have a reference but it would go back to employees and employer contribution rates. Just like
in the late 90’s and early 00’s most cities and public agencies did not have to contribute because PERS
was overfunded. After 9/11, we all saw rates sky rocket to employers and I would assume we would
see the same thing if Calpers investments were to determine insufficient, but that would be worst case
scenario. Also, remember they set up that side fund for the cash shortage and even though they saw
double digit returns the last few years, that wasn’t factored into our employer contribution rates or
reduction of the side fund.
Erick Cheung
Contra Costa Transportation Authority
Management Analyst
3478 Buskirk Ave., Suite 230
Pleasant Hill, CA 94523
Phone: (925)256-4733
Email: echeung@ccta.net
The responsibility for any deficiency falls on the agencies. The legislature and taxpayers are not footing
the bill for CalPERS.
Susan Greer
Assistant General Manager/Controller
Joshua Basin Water District
I believe it is the employers' liability; our rate would increase!
Hossein
Hossein Golestan
Finance Director
City of San Mateo
It's on each agency for their own retirees -- absolutely no direct access to tax levies !
"Richard Loomis" RLoomis@ci.pinole.ca.us
How could it not fall back on us?? It's our money and CalPERS is our agent. No risk was transferred.
Just remember, the cup is half full!
Barry Whitley
Finance Director
City of American Canyon
I think CalPERS will increase the contribution rates so that they do not run out of money.
Ed Muzik <edm@hdwd.com
See the State Treasurer’s statement below highlighted in red. It appears to be similar to the situation
with some of the institutions that are being bought out by the government. That is, the assets of the
company are separate from those belonging to other entities/individuals. I am not so naïve to believe
that nothing harmful could happen, but it does appear that there are conditions in place that help to avoid
the worst case scenarios. I worry more about the State not being able to pay its bills, thus reducing
revenues at the local agency level.
As Treasurer of the State of California, I believe it is my duty as California's chief fiscal officer to do all
that I can to preserve and protect the financial integrity of this state. I do not take that responsibility
lightly. Consequently, I have commented publicly that a national economic stabilization plan is absolutely
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and urgently necessary to begin to restore investor confidence in financial marketplaces. I have not
advocated the specifics of any proposal, but I have said and I am convinced that failure by Congress to
enact a timely and effective plan jeopardizes the ability of public and private debt issuers to come to
market. Chief among those imperiled public debt issuers at the moment is the State of California, though
many of your jurisdictions have surely also been affected by the credit freeze. As Controller John Chiang
and I have recently mentioned publicly, the State's cash reserves will be depleted by late October, making
passage of a stabilization plan and unlocking the nation's credit market essential to permit the state to meet
its cash needs before the end of the month.
As State Treasurer I am also the steward of State money and Local Government money which is
voluntarily commingled within the Pooled Money Investment Account (PMIA). The State's fiscal
crisis has an impact on the PMIA, but only to the extent of determining the pro rata participation of
the State in the commingled fund. If the cash reserves of the State of California are exhausted, then
the participation by the State's General Fund in the PMIA is zero. Nothing more and nothing less.
There is no correlation between General Fund cash reserves and your funds on deposit in the LAIF.
Those funds were yours before they were deposited, they remain yours while on deposit, and they
will be returned directly to you upon only your demand.
Joan Streit
Finance Director
Town of Moraga
I believe the agency would be on the hook….employees have a contract with their respective agency for
retirement benefits through CALPERS. If CALPERS couldn’t pay, I believe the agency would have to
make up the difference.I would suggest you run this by an attorney..but I believe I’m correct.
Robert Sedlak
City of Huntington Beach
I believe the PERS guaranteed annuity plan based on years of service and salary at time of retirement, that
the guarantee burden is held by the City.
"Diane Perkin" <dperkin@lakewoodcity.org
First the employer in that I believe the employer has a contractual obligation to make the payments which
equal increased retirement rates to the employer and ultimately the taxpayers in increased taxes or
reduced services.
"Squire, Lee" LEESQ@ci.brea.ca.us
How is the “employer” any different from the “taxpayers,” really?
The contract with PERS is with the employer, whatever that governmental entity is. If their
budget is insufficient such that they go bankrupt, I’m unclear what occurs next in terms of the
liability. The City of Vallejo might have an answer …
CRYSTAL C. ALEXANDER, CCMT
crystal.alexander@culvercity.org
310-253-5865
310-253-5880 fax
The individual public agencies would make up the difference in their retirement rates. Thank
you,
Jo Barrick
Administrative Services Director
City of Shafter
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