Anthony P. Archie is a public policy fellow in Business and Economic Studies. Prior to joining Pacific Research Institute, Anthony earned his masters degree in public policy from Pepperdine University, specializing in economics and regional/local policy. As part of his graduate work, he co-authored Crisis in California: Reforming Workers’ Compensation, a proposal that drew praise from an esteemed panel of scholars and policy advisors. Mr. Archie has held internships on Capitol Hill and in the State Assembly. He received his B.A. in economics and political science from Pepperdine University. [Archie index]

Death, Disability, and Deception
California's Attorney General's sidesteps the truth...
[Anthony P. Archie] 3/21/05

Recent hearings on Governor Schwarzenegger’s pension proposal have centered on the claim that death and disability benefits will be eliminated under the plan. Pensioners should beware that death and disability benefits aren’t going anywhere.

The governor’s plan to grant new state and local employees ownership of individual pension accounts has been penned in two forms, a bill in the Assembly and an initiative being circulated for signatures. They clearly state that California will close the existing defined-benefit system in favor of a more fiscally stable defined-contribution system. Unfortunately, political trickery has clouded the simplicity of the initiative’s language.

It is the responsibility of Attorney General Bill Lockyer to write the title and summary of every initiative that crosses his desk. In the summary for the pension initiative, he writes in a seven-word sentence that death and disability benefits will unequivocally be eliminated for new employees.

That one line has opened a Pandora’s box, creating anxiety for those who depend on this income. The hearings in the Senate and Assembly featured a number of concerned widows who feared a reduction in survivor benefits. Visibly disturbed by the summary’s language, they dismissed the pension reform as an attack on the families of police officers and firefighters. Injured law enforcement officers echoed that sentiment, calling the governor’s plan an “injustice.” Such rhetoric overlooks the reality that Mr. Lockyer’s statement is simply wrong.

Not only does the language of the pension plan unmistakably state that this measure applies solely to employees hired after July 1, 2007, there is no portion of the initiative that proposes the elimination, or even reduction, of death or disability benefits for the new hires.

The group backing the initiative, Citizens to Save California, released this statement on the matter: “We do not share the Attorney General’s interpretation. In our view public agencies could determine to offer death and/or disability benefits for employees in addition to the defined contribution plan.”

The governor seconded that when he said, “I can guarantee you that as long as I am governor, there will never be any death benefits or disability benefits taken away. It won’t happen.”

Despite the Attorney General’s misinformation, death and disability benefits can exist within defined-contribution plans. The state of Michigan operates under a 401k plan but also provides disability protection based upon salary and years of service. If an employee must retire due to the disability, he or she is entitled to no-cost life insurance coverage plus continued health, dental, and vision insurance.

In the event of a death, survivors will receive distributions of the employee’s 401k account and continued insurance coverage, as well as a life insurance payout equal to two times the employee’s annual salary. An additional $100,000 is provided if the death was due to an on-the-job injury.

A new pension system will not leave California’s public employees high and dry. Public employees and their families must not be duped by those who promote this untruth. The Attorney General of California, the highest law-enforcement official in the state, should not be in the fabrication business.CRO

copyright 2005 Pacific Research Institute

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