RETIREMENT ROULETTERETIREMENT ROULETTE

a guarantee or a a guarantee or a gamble?gamble?

Your Your Retirement…Retirement…

Defined Benefit COMPARISON Defined Contribution

YES Guaranteed Benefit NO

YES Retirement Related to Standard of Living

NO

NO Employee-Borne Investment Risk YES

YES Higher Rate of Return NO

YES Cost of Living Adjustment (COLA)

NO

YES Disability & Death Benefit NO

NO Employee-Borne Administrative Costs

YES

STRS COMPARISON PERS Defined Benefit Plan Type Defined Benefit

K - CC Teachers & Administrators

Employees Covered Education Support Personnel (ESP), state & local agency

$125 Billion Net Assets (FY 2004) $171.6 Billion 444,680 Active Members (FY

2004) 1,002,067

169,022 Retirees 416,783 No Social Security Coverage Varies; Yes for ESPs

Annual 2% Cost of Living Adjustment Up to 2% compounded based on CPI

Yes if benefit falls below 80%

Purchasing Power Protection

Yes if benefit falls below 75%

8% Employee Contribution Varies, 7% for ESPs 8.25% Employer Contribution Varies 2.017% State Contribution Varies, none for schools

1 highest consecutive (HC) year w/25+

years of service; 3 HC for others

Final Average Salary (FAS) Period

1 highest consecutive (HC) year

2% x YOS x FAS Benefit Formula 2% x YOS x FAS

AT RISK: CalPERS & CalSTRS Security

AT RISK: CalPERS & CalSTRS Security

•Secure Lifetime Benefits

•Professional Investment Managers Provide Superior Investment Performance

•No Risk to Participants

•Death and Disability Benefits

•Savings on Fees and Administrative Costs

•Secure Lifetime Benefits

•Professional Investment Managers Provide Superior Investment Performance

•No Risk to Participants

•Death and Disability Benefits

•Savings on Fees and Administrative Costs

Arnold and Company Arnold and Company say….say….The pension system is The pension system is “another government “another government program out of control.”program out of control.” -Feb. 2005-Feb. 2005

Arnold and Company Arnold and Company say….say….The pension system is The pension system is “another government “another government program out of control.”program out of control.” -Feb. 2005-Feb. 2005

““Public employee pension Public employee pension costs are devastating costs are devastating government budgets government budgets throughout California.”throughout California.” “Public Pensions: Solutions to crisis is in private sector,” by Assemblyman “Public Pensions: Solutions to crisis is in private sector,” by Assemblyman

Keith Richman,Keith Richman, San Diego Union Tribune, San Diego Union Tribune, 2/2/20042/2/2004

““Public employee pension Public employee pension costs are devastating costs are devastating government budgets government budgets throughout California.”throughout California.” “Public Pensions: Solutions to crisis is in private sector,” by Assemblyman “Public Pensions: Solutions to crisis is in private sector,” by Assemblyman

Keith Richman,Keith Richman, San Diego Union Tribune, San Diego Union Tribune, 2/2/20042/2/2004

Assemblyman Keith Richman (R-Chatsworth)

““[D]ue to union backed changes in the law [D]ue to union backed changes in the law over the last seven years, public employees over the last seven years, public employees are retiring on are retiring on lavishlavish pensionspensions.”.” Six Fallacies about Government Pensions, Six Fallacies about Government Pensions, by Jonathan Coupal and Richard Rider, 1/31/2005 at by Jonathan Coupal and Richard Rider, 1/31/2005 at www.hjta.org, www.hjta.org, emphasis addedemphasis added

“Now we are going to the source, right there where all the evil is and we are going to fix this problem once and for all.”-Feb. 2005

Their “Fix”?

“We want to feed the private sector, and we want to starve the public sector.”-Jan. 2005

“[Arnold and aides] want to unload the state’s fixed costs onto school districts and employees who, like workers in private businesses, would carry the risk of market volatility.”-“California gears up for pension showdown,” Jim Wasserman, Associated Press, Feb. 22, 2005

The Anti-fix: ACA 5’s Defined Contributions

ACA 5 Retirement Scheme

•Outlaws Secure Benefit Plans for All New Public Employees and Forces Them into Individual Risk Accounts

•Eliminates Disability and Death Coverage for Public Employees and Survivors

•Makes the Next Generation of Retired CA Teachers Among the Most Vulnerable of All Working Americans

ACA 5 Retirement Scheme

•Outlaws Secure Benefit Plans for All New Public Employees and Forces Them into Individual Risk Accounts

•Eliminates Disability and Death Coverage for Public Employees and Survivors

•Makes the Next Generation of Retired CA Teachers Among the Most Vulnerable of All Working Americans

ACA 5 Retirement Scheme

•Worsens Budget Problems

•Costs $7.9 BILLION in Transition Costs

•Bleeds School Districts

•Is the Most Extreme Proposed Pension Change in the Country

ACA 5 Retirement Scheme

•Worsens Budget Problems

•Costs $7.9 BILLION in Transition Costs

•Bleeds School Districts

•Is the Most Extreme Proposed Pension Change in the Country

Individual Risk AccountsIndividual Risk Accounts

Benefits Dependent on Ups and Downs of the Stock Market

Individual Investors Make Low Returns and Pay High Administrative Fees

Benefits Dependent on Ups and Downs of the Stock Market

Individual Investors Make Low Returns and Pay High Administrative Fees

Individual Risk AccountsIndividual Risk Accounts

NoNo Death and Death and Disability BenefitsDisability BenefitsNoNo Death and Death and Disability BenefitsDisability Benefits

Individual Risk AccountsIndividual Risk Accounts

NO COLA

NO Purchasing Power Adjustments

NO COLA

NO Purchasing Power Adjustments

Individual Risk AccountsIndividual Risk Accounts

NO Savings

NO Budget Fix

NO Savings

NO Budget Fix

Why ACA 5, the Anti-Fix?Why ACA 5, the Anti-Fix?•Keep Workers Voices Out of Corporate Boardrooms•Windfall for Financial Services Industry (Governor’s 2nd Largest Source of Contributions)

ACA 5: Serving the Corporate Interest

$$$

ACA 5: Serving the Corporate Interest

$$$Post-Enron/WorldCom/Tyco, corporate interests and their allies have launched a nationwide attack on the corporate reform movement and are assaulting pension funds.

ACA 5: Serving the Corporate Interest

$$$

ACA 5: Serving the Corporate Interest

$$$Gov. Schwarzenegger has acknowledged this plan is part of “a national battle” and he’s counting on “national money coming in to help us fight the battle.”

ACA 5: Serving the Corporate Interest

$$$

ACA 5: Serving the Corporate Interest

$$$Among Schwarzenegger’s allies:•Grover Norquist, Americans for Tax Reform•Stephen Moore, Free Enterprise Fund•Jon Coupal, Howard Jarvis Taxpayers Association•President Bush

Grover Norquist, Americans for Tax Reform

"115 people control $1 trillion in these funds…We want to take that power and destroy it." -May 14, 2001

“We'll also be able to shrink the number of government workers already on the payroll.”- Sept 2004

"115 people control $1 trillion in these funds…We want to take that power and destroy it." -May 14, 2001

“We'll also be able to shrink the number of government workers already on the payroll.”- Sept 2004

Grover Says….Grover Says….

“There is an overriding issue of what happens when you have these superlarge retirement systems straying from bottom line of the benefit of members and straying into corporate governance.”- Jonathan Coupal, Howard Jarvis Taxpayers Association, Jan 2005

“There is an overriding issue of what happens when you have these superlarge retirement systems straying from bottom line of the benefit of members and straying into corporate governance.”- Jonathan Coupal, Howard Jarvis Taxpayers Association, Jan 2005

Howard Jarvis Taxpayers Association Says….Howard Jarvis Taxpayers Association Says….

“Because the — all which is on the table begins to address the big cost drivers. For example, how benefits are calculate, for example, is on the table; whether or not benefits rise based upon wage increases or price increases. There's a series of parts of the formula that are being considered. And when you couple that, those different cost drivers, affecting those — changing those with personal accounts, the idea is to get what has been promised more likely to be — or closer delivered to what has been promised. Does that make any sense to you? It's kind of muddled."- Explaining his plan to privatize Social Security, Feb 2005

“Because the — all which is on the table begins to address the big cost drivers. For example, how benefits are calculate, for example, is on the table; whether or not benefits rise based upon wage increases or price increases. There's a series of parts of the formula that are being considered. And when you couple that, those different cost drivers, affecting those — changing those with personal accounts, the idea is to get what has been promised more likely to be — or closer delivered to what has been promised. Does that make any sense to you? It's kind of muddled."- Explaining his plan to privatize Social Security, Feb 2005

Bush Says….Bush Says….

ActiveOwnership

ActiveOwnership

InvestmentManager

Accountability

InvestmentManager

Accountability

SoundInvestmentGuidelines

SoundInvestmentGuidelines

WorkerRepresentation

WorkerRepresentation

The Real Agenda:The Real Agenda:

Since Proposals Are for New Employees, Will ACA 5 Affect

Me?Without new hires in plan, contribution rates will rise

New financial pressures on districts will impact collective bargaining

Pension COLAs and Purchasing Power Adjustments will disappear

Pits workers against each other, weakening our collective strength

What Can AFT 1521 Do?

What Can AFT 1521 Do?

What Can We Do?What Can We Do?

Defeat the Richman Bill Defeat the Richman Bill (ACA 5), (ACA 5), the initiative and similar attacks the initiative and similar attacks on our retirementon our retirement

Defeat the Richman Bill Defeat the Richman Bill (ACA 5), (ACA 5), the initiative and similar attacks the initiative and similar attacks on our retirementon our retirement

Protect public employee secure retirementProtect public employee secure retirementStop Social Security phase-outStop Social Security phase-out

Build a movement to ensure secureretirement for all

Build a movement to ensure secureretirement for all

What Can You Do? What Can You Do?

Spread the message on campus and Spread the message on campus and in your communityin your communitySpread the message on campus and Spread the message on campus and in your communityin your community

Get trained as a spokespersonGet trained as a spokespersonGet trained as a spokespersonGet trained as a spokesperson

Author Op-eds and letters to the Author Op-eds and letters to the editoreditor

Sign up for e-mail Action Alerts at Sign up for e-mail Action Alerts at www.aft1521.orgwww.aft1521.org

Write your elected officialsWrite your elected officialsWrite your elected officialsWrite your elected officials

Sign a COPE payroll deduction cardSign a COPE payroll deduction cardSign a COPE payroll deduction cardSign a COPE payroll deduction card

Stay informed through your Guild Stay informed through your Guild chapterchapterStay informed through your Guild Stay informed through your Guild chapterchapter

RETIREMENT ROULETTE

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