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RETIREMENT ROULETTERETIREMENT ROULETTE
a guarantee or a a guarantee or a gamble?gamble?
Your Your Retirement…Retirement…
Defined Benefit COMPARISON Defined Contribution
YES Guaranteed Benefit NO
YES Retirement Related to Standard of Living
NO
NO Employee-Borne Investment Risk YES
YES Higher Rate of Return NO
YES Cost of Living Adjustment (COLA)
NO
YES Disability & Death Benefit NO
NO Employee-Borne Administrative Costs
YES
STRS COMPARISON PERS Defined Benefit Plan Type Defined Benefit
K - CC Teachers & Administrators
Employees Covered Education Support Personnel (ESP), state & local agency
$125 Billion Net Assets (FY 2004) $171.6 Billion 444,680 Active Members (FY
2004) 1,002,067
169,022 Retirees 416,783 No Social Security Coverage Varies; Yes for ESPs
Annual 2% Cost of Living Adjustment Up to 2% compounded based on CPI
Yes if benefit falls below 80%
Purchasing Power Protection
Yes if benefit falls below 75%
8% Employee Contribution Varies, 7% for ESPs 8.25% Employer Contribution Varies 2.017% State Contribution Varies, none for schools
1 highest consecutive (HC) year w/25+
years of service; 3 HC for others
Final Average Salary (FAS) Period
1 highest consecutive (HC) year
2% x YOS x FAS Benefit Formula 2% x YOS x FAS
AT RISK: CalPERS & CalSTRS Security
AT RISK: CalPERS & CalSTRS Security
•Secure Lifetime Benefits
•Professional Investment Managers Provide Superior Investment Performance
•No Risk to Participants
•Death and Disability Benefits
•Savings on Fees and Administrative Costs
•Secure Lifetime Benefits
•Professional Investment Managers Provide Superior Investment Performance
•No Risk to Participants
•Death and Disability Benefits
•Savings on Fees and Administrative Costs
Arnold and Company Arnold and Company say….say….The pension system is The pension system is “another government “another government program out of control.”program out of control.” -Feb. 2005-Feb. 2005
Arnold and Company Arnold and Company say….say….The pension system is The pension system is “another government “another government program out of control.”program out of control.” -Feb. 2005-Feb. 2005
““Public employee pension Public employee pension costs are devastating costs are devastating government budgets government budgets throughout California.”throughout California.” “Public Pensions: Solutions to crisis is in private sector,” by Assemblyman “Public Pensions: Solutions to crisis is in private sector,” by Assemblyman
Keith Richman,Keith Richman, San Diego Union Tribune, San Diego Union Tribune, 2/2/20042/2/2004
““Public employee pension Public employee pension costs are devastating costs are devastating government budgets government budgets throughout California.”throughout California.” “Public Pensions: Solutions to crisis is in private sector,” by Assemblyman “Public Pensions: Solutions to crisis is in private sector,” by Assemblyman
Keith Richman,Keith Richman, San Diego Union Tribune, San Diego Union Tribune, 2/2/20042/2/2004
Assemblyman Keith Richman (R-Chatsworth)
““[D]ue to union backed changes in the law [D]ue to union backed changes in the law over the last seven years, public employees over the last seven years, public employees are retiring on are retiring on lavishlavish pensionspensions.”.” Six Fallacies about Government Pensions, Six Fallacies about Government Pensions, by Jonathan Coupal and Richard Rider, 1/31/2005 at by Jonathan Coupal and Richard Rider, 1/31/2005 at www.hjta.org, www.hjta.org, emphasis addedemphasis added
“Now we are going to the source, right there where all the evil is and we are going to fix this problem once and for all.”-Feb. 2005
Their “Fix”?
“We want to feed the private sector, and we want to starve the public sector.”-Jan. 2005
“[Arnold and aides] want to unload the state’s fixed costs onto school districts and employees who, like workers in private businesses, would carry the risk of market volatility.”-“California gears up for pension showdown,” Jim Wasserman, Associated Press, Feb. 22, 2005
The Anti-fix: ACA 5’s Defined Contributions
ACA 5 Retirement Scheme
•Outlaws Secure Benefit Plans for All New Public Employees and Forces Them into Individual Risk Accounts
•Eliminates Disability and Death Coverage for Public Employees and Survivors
•Makes the Next Generation of Retired CA Teachers Among the Most Vulnerable of All Working Americans
ACA 5 Retirement Scheme
•Outlaws Secure Benefit Plans for All New Public Employees and Forces Them into Individual Risk Accounts
•Eliminates Disability and Death Coverage for Public Employees and Survivors
•Makes the Next Generation of Retired CA Teachers Among the Most Vulnerable of All Working Americans
ACA 5 Retirement Scheme
•Worsens Budget Problems
•Costs $7.9 BILLION in Transition Costs
•Bleeds School Districts
•Is the Most Extreme Proposed Pension Change in the Country
ACA 5 Retirement Scheme
•Worsens Budget Problems
•Costs $7.9 BILLION in Transition Costs
•Bleeds School Districts
•Is the Most Extreme Proposed Pension Change in the Country
Individual Risk AccountsIndividual Risk Accounts
Benefits Dependent on Ups and Downs of the Stock Market
Individual Investors Make Low Returns and Pay High Administrative Fees
Benefits Dependent on Ups and Downs of the Stock Market
Individual Investors Make Low Returns and Pay High Administrative Fees
Individual Risk AccountsIndividual Risk Accounts
NoNo Death and Death and Disability BenefitsDisability BenefitsNoNo Death and Death and Disability BenefitsDisability Benefits
Individual Risk AccountsIndividual Risk Accounts
NO COLA
NO Purchasing Power Adjustments
NO COLA
NO Purchasing Power Adjustments
Individual Risk AccountsIndividual Risk Accounts
NO Savings
NO Budget Fix
NO Savings
NO Budget Fix
Why ACA 5, the Anti-Fix?Why ACA 5, the Anti-Fix?•Keep Workers Voices Out of Corporate Boardrooms•Windfall for Financial Services Industry (Governor’s 2nd Largest Source of Contributions)
ACA 5: Serving the Corporate Interest
$$$
ACA 5: Serving the Corporate Interest
$$$Post-Enron/WorldCom/Tyco, corporate interests and their allies have launched a nationwide attack on the corporate reform movement and are assaulting pension funds.
ACA 5: Serving the Corporate Interest
$$$
ACA 5: Serving the Corporate Interest
$$$Gov. Schwarzenegger has acknowledged this plan is part of “a national battle” and he’s counting on “national money coming in to help us fight the battle.”
ACA 5: Serving the Corporate Interest
$$$
ACA 5: Serving the Corporate Interest
$$$Among Schwarzenegger’s allies:•Grover Norquist, Americans for Tax Reform•Stephen Moore, Free Enterprise Fund•Jon Coupal, Howard Jarvis Taxpayers Association•President Bush
Grover Norquist, Americans for Tax Reform
"115 people control $1 trillion in these funds…We want to take that power and destroy it." -May 14, 2001
“We'll also be able to shrink the number of government workers already on the payroll.”- Sept 2004
"115 people control $1 trillion in these funds…We want to take that power and destroy it." -May 14, 2001
“We'll also be able to shrink the number of government workers already on the payroll.”- Sept 2004
Grover Says….Grover Says….
“There is an overriding issue of what happens when you have these superlarge retirement systems straying from bottom line of the benefit of members and straying into corporate governance.”- Jonathan Coupal, Howard Jarvis Taxpayers Association, Jan 2005
“There is an overriding issue of what happens when you have these superlarge retirement systems straying from bottom line of the benefit of members and straying into corporate governance.”- Jonathan Coupal, Howard Jarvis Taxpayers Association, Jan 2005
Howard Jarvis Taxpayers Association Says….Howard Jarvis Taxpayers Association Says….
“Because the — all which is on the table begins to address the big cost drivers. For example, how benefits are calculate, for example, is on the table; whether or not benefits rise based upon wage increases or price increases. There's a series of parts of the formula that are being considered. And when you couple that, those different cost drivers, affecting those — changing those with personal accounts, the idea is to get what has been promised more likely to be — or closer delivered to what has been promised. Does that make any sense to you? It's kind of muddled."- Explaining his plan to privatize Social Security, Feb 2005
“Because the — all which is on the table begins to address the big cost drivers. For example, how benefits are calculate, for example, is on the table; whether or not benefits rise based upon wage increases or price increases. There's a series of parts of the formula that are being considered. And when you couple that, those different cost drivers, affecting those — changing those with personal accounts, the idea is to get what has been promised more likely to be — or closer delivered to what has been promised. Does that make any sense to you? It's kind of muddled."- Explaining his plan to privatize Social Security, Feb 2005
Bush Says….Bush Says….
ActiveOwnership
ActiveOwnership
InvestmentManager
Accountability
InvestmentManager
Accountability
SoundInvestmentGuidelines
SoundInvestmentGuidelines
WorkerRepresentation
WorkerRepresentation
The Real Agenda:The Real Agenda:
Since Proposals Are for New Employees, Will ACA 5 Affect
Me?Without new hires in plan, contribution rates will rise
New financial pressures on districts will impact collective bargaining
Pension COLAs and Purchasing Power Adjustments will disappear
Pits workers against each other, weakening our collective strength
What Can AFT 1521 Do?
What Can AFT 1521 Do?
What Can We Do?What Can We Do?
Defeat the Richman Bill Defeat the Richman Bill (ACA 5), (ACA 5), the initiative and similar attacks the initiative and similar attacks on our retirementon our retirement
Defeat the Richman Bill Defeat the Richman Bill (ACA 5), (ACA 5), the initiative and similar attacks the initiative and similar attacks on our retirementon our retirement
Protect public employee secure retirementProtect public employee secure retirementStop Social Security phase-outStop Social Security phase-out
Build a movement to ensure secureretirement for all
Build a movement to ensure secureretirement for all
What Can You Do? What Can You Do?
Spread the message on campus and Spread the message on campus and in your communityin your communitySpread the message on campus and Spread the message on campus and in your communityin your community
Get trained as a spokespersonGet trained as a spokespersonGet trained as a spokespersonGet trained as a spokesperson
Author Op-eds and letters to the Author Op-eds and letters to the editoreditor
Sign up for e-mail Action Alerts at Sign up for e-mail Action Alerts at www.aft1521.orgwww.aft1521.org
Write your elected officialsWrite your elected officialsWrite your elected officialsWrite your elected officials
Sign a COPE payroll deduction cardSign a COPE payroll deduction cardSign a COPE payroll deduction cardSign a COPE payroll deduction card
Stay informed through your Guild Stay informed through your Guild chapterchapterStay informed through your Guild Stay informed through your Guild chapterchapter
RETIREMENT ROULETTE
Q&A