RELEASE: Understanding the Financial Status, Cost, and Sustainability of Public Pensions in Marin County

UC Berkeley Labor Center


FOR IMMEDIATE RELEASE | May 31, 2022
Contact: Van Nguyen | vann@berkeley.edu, (415) 506-8054

UC Berkeley Releases Public Pension Explainer for Marin County Public Employee Pensions; Finds that Pension Reforms Succeeded and that Current Employee Pension Costs Are Modest

BERKELEY, CA – A research brief released today by the UC Berkeley Labor Center unpacks pension costs for public employees in Marin County. This brief is the second of three in the Marin Public Pension Series, which focuses on the value, cost, and wealth equity impacts of defined benefit pensions for teachers, nurses, firefighters, and other workers who provide essential public services in the county.

Designed as a resource for policymakers and journalists, this brief explains how public pension costs are calculated and funded, including the impact of FY2021 investment returns on future employer rates. It also explains how the accounting and funding policy reforms adopted by CalPERS, CalSTRS, and MCERA—including faster pay-down of pension liabilities—have put the systems on stronger footing.

“Our research shows that pension costs for public employees in Marin County are either declining or near their peak, and that public employers can anticipate lower rates in the near future,” said Nari Rhee, director of the retirement security program at the UC Berkeley Labor Center and author of this brief. “CalPERS, CalSTRS, and MCERA have made progress in reducing their legacy unfunded liabilities, which account for one-half to two-thirds of taxpayer cost for Marin public employee pensions.”

Based on public data from the California Public Employee Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS), and the Marin County Employee Retirement Association (MCERA), the author found that current employee benefits account for just one-third to one-half of public employer pension costs in Marin County. The Public Employee Pension Reform Act (PEPRA), which capped benefits and increased employee cost sharing, cut employer costs for the pension benefits of employees hired after 2013 by up to one-third compared to older hires.

The author notes that the cost to school districts for the pensions of teachers hired since 2013 is only about 8% of pay, just 1.8% above the standard employer cost for Social Security, which schools do not pay because California teachers are excluded from the program. There is currently no unfunded liability associated with this group of teachers, who pay 10.025% out of each paycheck towards their own pension.

“While everyone is nervous about the stock market and the economy, it’s important to remember that CalPERS, CalSTRS, and MCERA have diversified portfolios that have outperformed their investment return targets over the long run, which includes two major recessions,” said Rhee. “The extraordinary investment returns from FY2021—21% for CalSTRS, 27% for CalSTRS, and 32% for MCERA—will serve as a cushion for employer rates over the next five years.”

This brief is the second in a three-part series focused on pensions for state and local government workers employed in Marin County. The first brief addressed the value proposition of public pensions, which offset the public sector pay penalty. The third brief will highlight the role of public defined benefit pensions in reducing retirement wealth inequality by race, gender, and income/education compared to 401(k)-style plans.

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Founded in 1964, the UC Berkeley Labor Center works to address the most critical challenges affecting working families in California and across the nation. The Center provides timely, policy-relevant research on labor and employment issues and carries out training and education programs for labor leaders and students.