The Fair and Sensible
Public Employee Retirement Plan Reform Act
Summary
Aligns state and local government retirement benefits with those offered by the federal government and large private employers…
• Employees hired after July 1, 2013 shall be eligible a for Defined Contribution (DC) plan.
• Defined Benefits (DB) pension for new employees will not exceed the defined benefit
formula offered to federal workers on January 1, 2011.*
• Qualifying compensation will not exceed 75 percent of taxable social security wages.
• Defined Benefits are payable when employees reach the retirement age established by
the Social Security Administration (now 62).
• Employees not covered by social security shall be provided with a supplemental defined
benefit equivalent of social security.
Public employees and taxpayers share costs…
• Current and future employees shall pay half the cost of pension and retiree health
benefits.
• Defined benefits shall be based on average of three years of qualifying compensation,
which excludes overtime, sick, vacation, bonuses, and severance.
• Retroactive benefit increases are prohibited.
• New employees may not receive lifetime medical benefits prior to age 65.
Improves efficiencies in benefit delivery…
• Disability benefits shall be provided by a joint powers authority, self-insurance or
private companies.
• Public employers shall provide competitive life insurance and disability benefits
integrated with retirement benefits and other insurance.
• Public employees may discontinue participation in their pension plan and select a
lower-cost plan.
• Public employees may opt out of their retiree health plan.
Improves governance and accountability of public pension plans…
• Two-thirds of a public pension plan’s governing trustees shall be independent of the
retirement system and two-thirds of independent trustees shall be certified or licensed
financial, actuarial, accounting, legal, benefits or investment professionals.
*For most federal workers, the Federal Employee Retiree System (FERS) benefit formula at age 62 is 1.1 percent of the highest three-year average annual salary multiplied by the years of service. The formula for public safety workers is 1.7 percent of the highest three-year average salary multiplied by 20 years of service plus one percent of highest three-year average salary times years of service exceeding 20.
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