A Refresher on the Pitfalls of the Public Employees’ Pension Reform Act

In 2013, the state of California implemented the Public Employees’ Pension Reform Act (PEPRA), which severely impacted the sworn members of law enforcement. For many years, I have written about the changes, and I was hoping the County and the Sheriff’s Department would better educate and prepare future sworn members about the changes brought forth by PEPRA. While these changes are devastating to some, and I believe to the future of our Department’s ability to retain quality people, they can be prepared for if employees max out their 457 plans and if the County decides to step up and do the right thing.

The main difference between PEPRA and the legacy systems is that in PEPRA, your income is capped in terms of how the County determines your pension benefits. It is not a cap on the pension, but, even worse, it is a cap on the amount that is used to calculate the pension. In easy terms, all sworn members will receive basically the same pension to a point, regardless of rank — not in percentages, but in actual dollars. A commander gets the same pension, in dollars, as a sergeant. A chief, the same as a sergeant. A captain, the same as a sergeant.

The issue at hand is many have no idea about this. For those who like details, I will give an example. The current PEPRA cap is about $145K per year. That means that no matter your salary, your pension is figured of that cap. So, if you retire at 80%, and you make $200K per year, it doesn’t matter. Your pension is 80% of the cap. Imagine those who are not ready for that or have not planned properly. I have tried and tried to get the administration of our Department to pay attention and to even educate everyone in super school about this and it fell on deaf ears.

Imagine a commander or chief retiring at the cap. The salary they were accustomed to is cut severely to retire. Imagine if they have a divorce to then pay for. Do the math. It is catastrophic for those higher-ranking individuals. The problem is some other agencies do not have PEPRA. Our Department is at risk of losing quality people to lateral transfer now as soon as they realize other agencies have a better pension, DROP programs and other benefits we never did or no longer offer. Captains and above in LASD do get additional 401(k) plans, but the lieutenants and sergeants do not. Even non-sworn professional staff at the higher ranks are impacted by PEPRA, and the County has done nothing.

The Board of Supervisors had many chances to fix the problem. LACERA is aware and has tried to make employees aware. The County has done nothing. That is incompetence at best.

I urge you all, if you have family members who hired on or after January 1, 2013, to tell them about PEPRA and how it impacts them. Educate them on their 457 plan and how they will need to use it.

In closing, PEPRA does have a cost-of-living adjustment that increases annually, but that rate is slow compared to the raises we get here in California. In 30 years, it is quite possible that all sworn members will receive the same pension, regardless of rank.

This law was flawed from the beginning. The Board of Supervisors knew it, the then-Sheriff knew it, and no one has done anything to fix it. Unfortunately, now it is too late. One fix I can imagine is to have the County, who has saved tens of millions of dollars on this new cheaper system, add a 401(k) to all employees, increase its side of a match, and add a DROP program or other things to retain quality people. I will tell you right now, if I were looking at a job in law enforcement, I would definitely examine all agencies and their pension systems and look for one that is fair to employees.

The County continuously is trying to erode our benefits. In the past several years, we have lost health care for our family members in retirement, our pension system has devolved and the County continues to reap the benefits of those savings, without doing anything for its employees. It is quite frankly a shame. They haven’t even raised the cap on our Blue Cross health insurance in retirement in decades.

With the County, it is never “do the right thing,” it is always “nothing is free” or “what will you give up as employees.” And I am frankly sickened by it.

Sorry for the doom and gloom, but this is huge and everyone needs to be able to plan for their future security.

Until next month, be safe and healthy.