Money & Company
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August 12, 2011 | 12:01 am
Switching California state government pensions to a hybrid system that provides a modest monthly check plus a 401(k)-type savings plan could save taxpayers about $250 million right away and generate billions of dollars in savings in future years, according to a new study by a pension reform organization.
Savings would be much higher, roughly $2 billion, if state workers were required to pay up to half of the cost of their early retirement health insurance premiums, said the report released Friday by the California Foundation for Fiscal Responsibility in the Sacramento suburb of Citrus Heights.
Immediate savings at the local government level would be $3 billion to $4 billion a year, the report said.
Those numbers could more than double if state and local pension funds fail to achieve annual investment returns of between 7% and 8%, the report said.
“Our analysis shows that substantial savings can be achieved if the state and local governments provide retirement benefits comparable to those offered by the federal government,” said one of the authors of the study, Michael Genest, a former state director of finance.
Government should “share the cost and risk with their employees just as the federal government and private companies do,” Genest said.
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