California’s Retirement-Age Increase Puts State in Rare Company

Governor Jerry Brown’s proposal to raise the age when most public workers can retire with full benefits to 67, from 55, would put California in the company of just three other states.

The change, which still must win Legislative or voter approval, reflects Americans’ increased longevity and the strain that adds to government pension plans, Brown said Oct. 27, when the Democrat released proposed changes. Extending the retirement age boosts fund contributions and curbs benefit payments.

“There’s a lot of great years left in your seventies and eighties,” Brown, 73, told reporters at a briefing on his plan. It would let police officers, firefighters and others with physically demanding jobs retire earlier without benefit cuts.

California would join Minnesota, Illinois and Missouri in raising the age threshold as a way to shave costs. Changes such as higher employee-contribution rates and the elimination of overtime pay from benefit calculations would help cut expenses in half, Brown said. States across the U.S. are grappling with pension obligations that are growing faster than revenue.

Since 1989, public employees in Minnesota have had to reach 66 to step down with full benefits, according to Susan Barbieri, a spokeswoman for the state’s Teachers Retirement Association.

“We were quite far ahead of other states in reforming the system,” Barbieri said in a telephone interview.

60-62 in Most

Illinois and Missouri both bumped up their retirement age to 67 last year, according to Keith Brainard, research director for the National Association of State Retirement Administrators. Most states have thresholds of 60 or 62 years old, he said.

Congress in 1983 increased the age at which Americans can collect full Social Security payments to 67 for those born after 1959, according to the Social Security Administration’s website. The earliest at which an able-bodied person can start collecting partial benefits remains 62.

Brown’s age extension may be too aggressive for the state’s educators’ union, according to Frank Wells, a spokesman for the California Teachers Association. The average retirement age for a member is 62, he said.

“Sixty-seven is kind of advanced,” Wells said by telephone. “We don’t want to see him doing anything that would make it more difficult to recruit and retain teachers.”

If the retirement age is raised, government workers in California would contribute to pensions for more years. Also, delaying payments until workers are older will cut total costs. Brown’s proposed change would apply only to newly hired workers.

The retirement age for California workers not in public- safety jobs was 65 in 1932, when the state created its pension system, according to a summary of Brown’s proposals. At that time, a 20-year-old wasn’t projected to survive beyond 70.

Changes since then reduced the retirement age, even though longevity rose, Brown said. The average American’s life expectancy is almost 78 years, according to the U.S. Centers for Disease Control and Prevention.

“These pension reforms will go a long way to making our pension system more sustainable,” Brown said last week.

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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