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Commentary: The recent growth of six-figure pensions

April 16, 2014|By the Costa Mesa Pension Oversight Committee

Editor's note: Attorneys John Stephens and Tim Sesler, two members of Costa Mesa's Pension Oversight Committee, asked the Daily Pilot to publish the panel's findings and recommendations. The committee put together a series of three articles that seek to explain and simplify the complex subject matter to residents. This is the second installment. Part 3 will appear Friday.

Across the state, newspaper headlines have reported that nearly 21,000 former California public employees are receiving pension benefits exceeding $100,000 per year. Understanding that the recipients of these benefits are typically career public safety workers (police and fire) or high-level management, it is important to recognize the full impact of such pensions.

This installment will discuss Costa Mesa's $100,000 pensions, their recent growth, the benefits paid to the retiree, the cost to fund the pension, and possible taxpayer exposure should CalPERS investment earnings fail to reach projections.

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Today, Costa Mesa has about 410 full-time employees and 500 full-time career retirees receiving annual pension payments that exceed $15,000 (about 180 additional retirees who served either partial careers or as part-time employees receive annual pension benefits of less than $15,000). Of the 500 career retirees, 83 currently receive annual pension benefits exceeding $100,000.

Because of increases in wages and pension benefits, the number of career employees reaching the $100,000 threshold has grown significantly. In the three years beginning in 2003, the city experienced 75 career retirements, and 8% of the retirees received first-year pensions exceeding $100,000. In the three years beginning in 2010, the city experienced 66 career retirements, and 39% of those retirees received first-year pensions exceeding $100,000.

Lifetime benefits paid on pensions

All Costa Mesa pension benefits are paid for life and increase 2% annually because cost-of-living adjustments are part of the pension formula. To estimate the lifetime benefits paid to retirees, it is necessary to make basic assumptions related to retirement age and life expectancy.

The most recent retirement report from the city indicates that the average retirement age for police safety employees is 52 after 23 years of service. The average retirement age for fire safety employees is 55 after 28 years of service. For all other employees, commonly referred to as "miscellaneous," the average retirement age is 58 after 21 years of service.

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