US - A small city on the Californian coast could be the first to pull out of the California Public Employees' Retirement System (CalPERS), citing its inability to pay increased contribution costs.
A spokesperson from Pacific Grove city manager's office, who did not wish to be named, told Global Pensions: "We are investigating our options and wrote to CalPERS to find out our valuations and obligations; their actuary said this process could take up to two years."
Under state laws, the city would have to take both active and retired members out of CalPERS and assume all liabilities.
The spokesperson said: "We have the daunting self-funded option, defined contribution (DC) route or could have someone assume our pensions obligations, but I do not think these costs would be that different to what we pay at the moment.
"We could also ask employees to pay more and the city contribute less."
However, Edd Fong, information officer, CalPERS, said just looking at the contribution jump was misleading.
"The employee's contribution is fixed, but the employers' contribution can go up or down based on how well funded the scheme is," Fong said.
"It is also important to take investment into account which affects contribution levels."
Professor David Blake, director of the Pensions Institute at Cass Business School, said: "This is a small town and my fear is they don't know what they're getting in to.
"With CalPERS they benefit from economies of scale and risk pooling; if they go it alone, unless all the risks they buy back are immediately transferred to the members, the town will assume everything."
At a recent town meeting, several state employer representatives voiced opposition to the proposed move, saying it would harm recruitment in the town.
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