US - Many workers affected by California's budget deficit-reducing furlough scheme will not face lower pensions, thanks to an agreement reached between the state and a major union.
An agreement between the Service Employees International Union (SEIU), which represents over 700,000 workers in California, and the state government, means state workers will no longer be forced to take two 'furlough' days each month until July 2010, but would instead take a 4.6% pay cut (equivalent to one day of lost pay) and a further day's leave each month.
Calculations for pension contributions, however, would be treated as if no pay reduction had taken place, safeguarding California Public Employees' Retirement System (CalPERS) member benefits.
A report by the California Legislative Analyst's Office (LAO) on the agreement stated: "The [agreement] specifies that neither retirement benefits nor various other benefits would be affected by this pay change.
"This means that CalPERS' calculations of retirement benefits will be based on the salary the employee would have received if no pay reduction had been implemented. Also, it appears that the state and employees will make pension contributions to CalPERS based on the lower pay levels implemented as part of this agreement."
Last month, US$174bn CalPERS announced it was to close to members, employers and the general public for two days a month as part of the state-wide cost saving scheme unveiled by government Schwarzenegger to reduce state spending in light of California's $40bn budget deficit (Globalpensions.com; 6 February 2009).
Under the revised conditions, the plan would save the state over $330m.
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