unfunded public pensions

A severance package is pay and benefits an employee receives when he or she leaves employment at a company. Unlike a severance pay, a pension is a contract for a fixed sum to be paid regularly to a person. This payment is usually given after retirement. Furthermore, pension plans are used to provide a source of income after retirement after these public employees are no longer receiving a steady income. Established in 1932 by state law, California’s public pension plan set out to ensure the financial security of retirees. Although this system may have worked then, over time society has changed and the public pension plan not adapted with the times. One of the biggest problems is that these pensions were negotiated years ago and it is hard to change now. Currently the California Public Employees' Retirement System and the California State Teachers' Retirement System service at least 3,000 public employees and as of 2011 employed 2,366 people. However, these systems are at least $165 billion underfunded. Although the California public pension system has many benefits, this system also has many flaws that, without reform, will lead California into major debt.
An unfunded public pension is an employer managed retirement plan that funds allowance payments as they become necessary. These public pension plans are funded from three different sources: the employee himself, investment returns, and government contributions. Retirement benefits that state employees earn are a part of their compensation, as well as employees’ contributions to cover part of the costs of those benefits. The California Public Employees' Retirement System, otherwise known as the CalPERS, is an agency that manages “retirement, health, and related financial programs and benefits to more than 1.6 million public employees, retirees, and their families and more than 3,000 public employers” (CalPERS 1). The state also makes employer contributions to California Public Employees' Retirement System.