(Please do NOT reply to this email.  Please send email responses to aftjim@pacbell.net.)

Some of you have asked what the difference is between a Defined Benefit
(DB) plan (what we have now) and a Defined Contribution (DC) plan (what
the Governor wants us to have).

In a DB plan, like PERS or STRS, the employer and employee make yearly
contributions to a pension fund.  The pension fund manages these
investments in order to keep the fund solvent.  The employee is
GUARANTEED a certain level of pension upon retirement based on the
employee's age, years of service, and highest salary.

In a DC plan, the employer and employee also make yearly contributions,
but there is NO GUARANTEE how much money will be available for a
retirement pension when the employee retires.  The yearly contributions
are invested in usually some mix of stocks, bonds, mutual funds, etc.,
that the employee usually chooses from among various options, but the
amount available at retirement is dependent solely on the performance of
these investments over the duration of the employee's career.  If they
perform badly, oh well, no pension for you.

Below is a bulletin sent out by CFT Legislative Representative Dolores
Sanchez regarding the politics currently at play here in California
regarding this issue.  Simply put, it's Arnold's version of Bush's plan
to privatize Social Security, i.e.; move from a DB plan (what Social
Security is now) to a DC plan (what Bush wants).

Please let me know if you have any questions or concerns regarding this
issue as it will become the focus of a major fight during this calendar
year.

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From: Dolores Sanchez, CFT Legislative Representative
Subject: ALERT:  Governor proposes to overhaul PERS and STRS
 
In his State of the State address the Governor proposed replacing the
PERS and STRS defined benefit (DB) plans with defined contribution (DC)
plans.  Defined contribution plans are similar to 401(k) investment
models.  The Governor intends to introduce several pieces of legislation
at a special legislative session he plans to call.  Ending traditional
pensions for public employees would represent a major shift in the
manner in which pensions have been provided.  The CFT has historically
fought against similar measures. As with other issues, the Governor has
declared that should he not get his way in the legislative arena with
these so-called reforms he plans to place them on a statewide ballot in
a special election later this year.
 
On the current initiative front, Assemblymember Keith Richman
(R-Northridge) and the Howard Jarvis Taxpayers Association have jointly
filed an initiative with the State Attorney General that would require
State and local employers to offer a defined contribution plan for any
new employee hired. 
 
I have been unable to confirm all the details of the proposed
initiative, but I understand that it will include the following
elements:
 
• The defined contribution plan will have maximum contributions of 6%
for state employees covered by Social Security and 9% percent for public
safety employees;

• If employees are not covered by Social Security, the plan will have
maximum contributions of 9% for state employees and 12% for safety
employees; and,

• The initiative, if passed, would impact the State of California, STRS,
the Judges’ Retirement System, and all public employers in and outside
PERS.
 
Additionally, Assemblymember Richman has introduced Assembly
Constitutional Amendment 5 that replaces DB plans in favor of DC plans
for workers hired after July 1, 2007. 
 
Click on the link below to view a copy of the legislation.
 
http://www.leginfo.ca.gov/pub/bill/asm/ab_0001-0050/aca_5_bill_20041206_
introduced.html