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By Michael B. Marois – Jan 30, 2013 5:01 PM PT

The California Public Employees’ Retirement System was flooded last month with applications by government workers seeking to buy additional years of service that can be counted toward their pension when they retire.

The practice, known as buying “air time,” was barred Jan. 1 under legislation sought by Democratic Governor Jerry Brown to curb costs. The largest U.S. public pension said it received 12,000 applications in December, up from an average of 1,100 a month in fiscal 2012, and 400 a month the prior year.

California public employees were allowed to add as much as five years of credit for time they didn’t actually work to the formula used to calculate their pensions. The $254 billion fund said there’s no cost to taxpayers as long as the system meets its target investment return of 7.5 percent over the long term.

“Ultimately, we don’t truly know until everybody who has purchased dies,” said Amy Norris, a Calpers spokeswoman, referring to the size of the payouts. “Our actuaries say that it is safe to say it is cost-neutral at this point.”

The pension has earned more than 9 percent over 30 years and 7.7 percent over 20. It suffered its biggest one-year decline in 2009, putting its five-year return at just 0.1 percent as of Sept. 30.

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