US - California governor Arnold Schwarzenegger has signed a bill introducing a hybrid pension plan for Orange County employees paving the way for a two-tiered retirement system.
According to the bill, both new hires and current employees will be given the option of choosing the existing defined benefit plan or a new hybrid that combines a smaller defined benefit payment with a 401(k)-style individual investment plan.
Author of the bill senator Lou Correa said the system would produce cost savings of at least US$10m for the first year and possibly millions more thereafter.
Correa added: "This measure is a breakthrough program that the workers, the Orange County Employees Association and the County of Orange have agreed to. It is a plan that can serve as a role model for the rest of the state."
Separately, Schwarzenegger signed another bill which will require more disclosure by placement agents looking for business from government pension funds. The bill was approved by the state Senate in September (Global Pensions, September 7, 2009).
The new law requires all public pension systems to disclose fees paid to investment placement agents, campaign contributions and gifts made by placement agents to public retirement board members, for the 24-month period prior to solicitation.
It also prohibits public retirement board members from selling investment products to other public retirement systems.
The California bill comes amid an ongoing investigation on pay-to-play practices at New York pension funds by the New York attorney general Andrew Cuomo. His investigation has so far resulted in several guilty pleas and millions of dollars being returned to the New York State Common Retirement Fund (Global Pensions, October 7, 2009).
Pension funds in New York and New Mexico have also banned the use of placement agents.
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