Is My Pension Safe? - SEIU Local 660

Is My Pension Safe?

Important Facts for SEIU Local 721 Members

Members of SEIU 721 belong to one of the following Retirement Funds: LACERA ? Los Angeles County Employees Retirement Association LACERS ? Los Angeles City Employees Retirement System VCERA ? Ventura County Employees Retirement Association SBCERS ? Santa Barbara County Employees Retirement System CalPERS ? California Public Employees Retirement System Most Municipal employees (other than Los Angeles City workers) from cities in the counties of Los Angeles, Orange, Ventura, Riverside and Santa Barbara are CalPERS members, as are Riverside County workers. L.A. Water & Power Employees' Retirement Fund ? Some Local 721 represented Los Angeles City employees are covered by this fund.

There are two types of pensions, and most of our members have both: Defined Contribution (DC) Plans These are 401(K) plans (also known as 457 plans for public employees) which are largely market based. Members' deferred compensation are often partially matched by employers. They are useful supplemental plans for public employees. But they are not guaranteed, and are subject to the ups and downs of the stock market; they have taken substantial losses this year. It is important to recognize, however, that the stock market (and therefore DC plans) will rise over time despite the current crisis. Defined Benefit (DB) Plans All public sector SEIU 721 members are covered by DB plans. They are guaranteed for life. The amount of your pension is based on your final compensation (single year or 3 year average, depending on your plan), your age at retirement and your years of service. Most of the money (usually over 80%) that pays the pension benefit comes from returns on the investments made by your pension fund. In the unusual event that your pension fund can not cover all its pension obligations to retirees, your employer is required by law to make up the difference.

In the event that your fund's earnings drop (and they are all currently dropping due to the market downturn), our employers must increase their contribution. The more money employers contribute, the less money they will have in their general fund. Therefore this can have an impact on bargaining.

SEIU Local 721 ? 500 S. Virgil Avenue, Los Angeles, CA 90020 ? (213) 368-8660 ?

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Useful Definitions

Actuarial evaluation ? a calculation of the costs of benefits using life-expectancies, years of service, salaries and other factors related to retirees and vested active members. The evaluation is performed by professional actuaries (specialists in the mathematics of risk) hired by the pension funds.

Funding ratios ? the ratio of a pension plan's assets to its liabilities (the higher the percentage, the smaller the liability).

Benchmark goal ? benchmarks measure the performance of a predetermined set of investments for comparison purposes. The benchmark goal is the minimum expectation for the rate of returns on investments.

Hedge funds ? non-transparent funds which employ various techniques to enhance returns, such as buying and shorting stocks. During the recent downturn their need to pay clients led many analysts to blame them for driving markets down through excessive shorting of stocks.

The Funds

LACERA: The fund sustained losses of approximately 30% through mid December. The size of the fund at that point was $28 Billion. As of the last actuarial evaluation in June 2007, LACERA had a funding ratio of 94%. LACERA maintains a benchmark goal of 7.75%. The fund has no exposure to hedge funds.

SBCERS: The fund sustained losses of approximately 17.4% in the last year through September 30. The size of the fund as of October 3 was $1.544 Billion. Its funding ratio was 88.6% as of the last actuarial evaluation, and it maintains a benchmark of 8%. SBCERS has no exposure to hedge funds.

LACERS: The fund has sustained losses of approximately 32% this year. The current size of the fund is $7.5 Billion. As of the last actuarial evaluation, LACERS' funding ratio was 81.7%. LACERS maintains a benchmark goal of 8%. The fund has no exposure to hedge funds.

VCERA: The fund has sustained losses of about 32% this year. The current size of the fund is $1.9 Billion. The funding ratio as of the last actuarial evaluation was 88%. They do not currently have exposure to hedge funds, but are considering investing 1% ? 2% of their assets in 2009.

CalPERS: The fund has sustained losses of approximately 32% this year. The current size of the fund is about $180 Billion ? still the largest public pension fund in the U.S. As of its last actuarial evaluation, CalPERS was 92% funded. The fund maintains a benchmark of 7.75%. CalPERS has substantial exposure to hedge funds.

Water and Power Retirement Fund: The current size of the fund is $5.5 Billion. As of its last actuarial evaluation, WAPRF was 95% funded. It maintains a benchmark of 8%. Its exposure to hedge funds totals 1%.

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