Public Pension Reform in California

Abstract

The Public Employee Pension Reform Act became effective in 2013. It will take many years before it has a meaningful impact on pension plan underfunding due to the so-called California Rule under which public employees are guaranteed the pension benefits in force on the date of hire. Meanwhile, three California cities have filed for Chapter 9 bankruptcy and more will follow. In an effort to annul the California Rule, and allow employers to change benefit accruals prospectively, the mayors of San Jose and four other cities have sponsored an initiative to amend the California constitution to allow public employers to alter pension benefit formulas prospectively. This article appraises these several developments and their interaction.