The California Public Employees’ Retirement System (CalPERS) is the nation’s largest pension fund, with assets exceeding $182 billion. CalPERS provides pensions to 1.4 million former state employees by paying “defined benefits,” guaranteed amounts based on each employee’s peak salary and years of service.

Gov. Arnold Schwarzenegger backs a proposed California constitutional amendment (ACAX1) that would limit new public employees hired after July 1, 2007, to “defined contribution” plans under which the state would match an employee’s retirement contribution up to a specified amount. These individual 401k-type plans would make state budgeting simpler, free taxpayers from annual pension deficits, and empower public employees with privately owned retirement accounts. As new public employees enroll in defined-contribution plans and former employees die, CalPERS will eventually phase out of existence. Allies of CalPERS are not happy with this prospect.

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