California

Overview

The state of California features over 80 public retirement systems, which includes three statewide systems: the California Public Employees Retirement System, the California State Teachers’ Retirement System (the largest and second-largest public retirement systems in the nation) and the University of California Retirement System.  CalPERS administers pension benefits for employees of the state, 37 counties, and more than 1,500 other political subdivisions including school districts. CalSTRS provides pension benefits for certificated public school teachers and employees of community colleges.

Other large public retirement systems in California include the Orange County Employee Retirement System (OCERS), the San Diego County Employees' Retirement Association (SDCERA), the Los Angeles County Employees Retirement Association (LACERA), the San Francisco City & County Retirement System (SFERS), and the Los Angeles City Employees Retirement System (LACERS).
In addition to the defined benefit offerings, eligible state employees may participate in the California Savings Plus Program. The Savings Plus Program provides employees with a 401(k) Plan and a 457 Plan to supplement their pension benefits.

Plan Design

Most California public employees participate in a defined benefit plan, with the exception of employees of community colleges and some part-time school employees that have elected to participate in a cash balance plan. Fewer than one percent of public workers participate in the cash balance plan.   

According to the US Government Accountability Office, 40 percent of employees of state and local government in California participate in Social Security.

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Authorizing Statutes and Board Structure

State-level
Article XVI of the California State Constitution covers public finance. Section 17 of this article provides for the provision of pensions by a retirement board, who is vested with the responsibility of administering pension funds.

Proposition 162 (The California Pension Protection Act of 1992) amended Section 17 of Article XVI of the California State Constitution and made several changes to California's public retirement systems. Proposition 162 states:

Provided the authority for the board of each public pension system to administer the system's assets and actuarial function
Established that each public pension board is to make providing benefits to members and beneficiaries its' highest priority
Set forth the conditions under which the terms and conditions for board membership may change; no changes may be made unless a majority of voters in the jurisdiction of the retirement system in question approve.

CA Govt Code § 20090 establishes the CalPERS Board of Administration, which includes 13 members. 

The California State Teachers' Retirement System was established by law in 1913 to provide benefits to the state's public school teachers. Part 13 of the California Education Code establishes CalSTRS.

CA Educ Code § 22200 establishes the Teachers’ Retirement Board, which includes 12 members. 

Local-level
The County Employees Retirement Act of 1937 provided for retirement systems for California counties. Today 20 California counties operate separate retirement systems under the provisions of this act. These counties include Alameda, Contra Costa, Fresno, Imperial, Kern, Los Angeles, Marin, Mendocino, Merced, Orange, Sacramento, San Bernardino, San Diego, San Joaquin, San Mateo, Santa Barbara, Sonoma, Stanislaus, Tulare, and Ventura.

Chapter 16 of the San Francisco Municipal Code defines pension benefits and covers eligibility, method of payment, and forfeiture/waiver of benefits for the San Francisco City and County Retirement System.

Details regarding the composition of these and other retirement boards is accessible via the Retirement and Investment Board Characteristics search tool located at the bottom of this page.

Fiduciary Duty/Prudence Standard

Statewide
CA Constitution art XVI § 17 states:

...Notwithstanding any other provisions of law or this Constitution to the contrary, the retirement board of a public pension or retirement system shall have plenary authority and fiduciary responsibility for investment of moneys and administration of the system, subject to all of the following:

(a) The retirement board of a public pension or retirement system shall have the sole and exclusive fiduciary responsibility over the assets of the public pension or retirement system. The retirement board shall also have sole and exclusive responsibility to administer the system in a manner that will assure prompt delivery of benefits and related services to the participants and their beneficiaries. The assets of a public pension or retirement system are trust funds and shall be held for the exclusive purposes of providing benefits to participants in the pension or retirement system and their beneficiaries and defraying reasonable expenses of administering the system.
(b) The members of the retirement board of a public pension or retirement system shall discharge their duties with respect to the system solely in the interest of, and for the exclusive purposes of providing benefits to, participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of administering the system. A retirement board’s duty to its participants and their beneficiaries shall take precedence over any other duty.
(c) The members of the retirement board of a public pension or retirement system shall discharge their duties with respect to the system with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of a like character and with like aims.
(d) The members of the retirement board of a public pension or retirement system shall diversify the investments of the system so as to minimize the risk of loss and to maximize the rate of return, unless under the circumstances it is clearly not prudent to do so.
(e) The retirement board of a public pension or retirement system, consistent with the exclusive fiduciary responsibilities vested in it, shall have the sole and exclusive power to provide for actuarial services in order to assure the competency of the assets of the public pension or retirement system.

CalPERS
CA Govt Code § 20151 states: 

The board and its officers and employees shall discharge their duties with respect to this system solely in the interest of the participants and beneficiaries:
(a) For the exclusive purpose of both of the following:
(1) Providing benefits to members, retired members, and their survivors and beneficiaries.
(2) Defraying reasonable expenses of administering this system.
(b) Minimizing the employers' costs of providing benefits under this part.
(c) By investing with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with those matters would use in the conduct of an enterprise of a like character and with like aims.

CalSTRS
CA Educ Code § 22203 states:

The board has exclusive control of the investment of the Teachers' Retirement Fund. Except as otherwise restricted by the California Constitution and by law, the board may in its discretion invest the assets of the fund through the purchase, holding, or sale thereof of any investment, financial instrument, or financial transaction when the investment, financial instrument, or financial transaction is prudent in the informed opinion of the board.

Legal Protections of Retirement Benefits

California case law now recognizes that public pension rights are governed by statute and not contract principles. Gutierrez v. Board of Retirement, 72 Cal.Rptr.2d 837 (1998); Betts v. Board of Admin., 582 P.2d 614 (Cal. 1978)("A public employee's pension constitutes an element of compensation, and a vested contractual right to pension benefits accrues upon acceptance of employment. Such a pension right may not be destroyed, once vested, without impairing a contractual obligation of the employing public entity."); California Ass'n of Professional Scientists v. Schwarzenegger, 40 Cai.Rptr.3d 354, 137 Cai.App.4th 371 (App. 3 Dist. 2006)(public employment gives rise to certain obligations, including pension rights, which are protected by the contract clause of the CA Constitution); County of Orange v. Association of Orange County Deputy Sheriffs, 121 Cai.Rptr.3d 151, 92 Cai.App.4th 21 (App. 2 Dist. 2011)(pension rights are obligations protected by the contract clause of the federal and state constitutions, unlike other terms of public employment which are wholly a matter of statute); but see Teachers' Retirement Bd. v. Genest, 65 Cai.Rptr.3d 326, 154 Cai.App.4th 1012 {App. 3 Dist. 2007)(public employees have vested contractual rights to pension benefits, but not every change in a retirement law constitutes an impairment of the obligations of contracts); but see San Diego City Firefighters, Local 145, AFL-CIO v. Board of Admin. of San Diego City Employees' Retirement System, 141 Cal. Rptr. 3d 860 (Cal. App. 4th Dist. 2012)(pension benefits adopted by resolution rather than ordinance were void). (CA CONST., Article 1, §9) Source: Robert Klausner, Esq., State Constitutional Protections for Public Sector Retirement Benefits

See also the following search tools:

More Data

• Public Fund Survey Summary of Findings
• Roll Call (NASRA members-only)