CalPERS safeguards against errors in pension benefits.

SACRAMENTO, Calif.--(BUSINESS WIRE)--June 26, 1997--A recent federal government audit finding that 13.7 percent of private sector retirees nationwide are being shortchanged in their pensions does not affect retirees covered by the California Public Employees' Retirement System (CalPERS).

CalPERS officials say safeguards are in place to make sure its members do not receive pension payments that are less than they have earned.

"We go the extra mile to ensure that CalPERS pension benefits are calculated accurately so that our members who have worked hard all of their lives get every penny they deserve," said Michael Flaherman, chairman of the CalPERS Benefits and Program Administration Committee.

The main way CalPERS validates the accuracy of retirement benefits is with periodic audits conducted by CalPERS and independent outside auditors. These internal and outside auditors also periodically review the procedures that are in place at CalPERS to assure appropriate and accurate pension benefits are calculated and paid.

For example, CalPERS periodically audits the procedure used to make adjustments to its retirement rolls; the processing of membership applications; the method for calculating pre-retirement death and disability retirement benefits; and the procedure used for determinations and processing of service retirements.

Independent outside auditors annually select a sample of CalPERS members to verify the accuracy of relevant retirement benefit information. Then, using this information, the independent auditors test the CalPERS database and calculation programs to ensure benefit payments are calculated accurately.

Another safeguard CalPERS provides for all members is an annual statement of earned benefits. The annual statement summarizes the activity in a member's account during the preceding year, such as changes in service credit and member contributions. For members over 45 years old, the annual statement provides an estimated retirement allowance.

Booklets are published at CalPERS that enable members to do their own calculation of retirement annuities and compare with the annual statement issued by CalPERS. In addition, members can access retirement calculation software at computer terminals at the main CalPERS office in Sacramento and at the System's seven Area Offices, which again is a source for comparing against the annual statement.

Some private pension funds do not provide annual statements of pension benefits earned, unlike CalPERS. In fact, Senator Charles E. Grassley of Iowa, chairman of the Senate Special Committee on Aging, says workers should insist on a detailed statement of their retirement benefits every two or three years.

According to a federal government audit performed by the Pension Benefit Guaranty Corporation, private sector pension laws for calculating benefits are confusing to employers. Subsequently, benefit calculation errors are made and retirees end up receiving less pension benefits than they were entitled to. And, the problem is getting worse: The error rate for private sector pension funds has grown since 1988, when less than 3 percent of retirees were underpaid, according to the federal audit.

Benefit calculations of private sector pension plans are subject to complex federal laws in the Employee Retirement Income Security Act, most of which do not affect state government pension plans such as CalPERS.

At CalPERS, retirement calculations are performed by highly trained staff. The staff's training program includes formal classroom instruction as well as on-the-job training in all elements of retirement calculations, such as service credit and final compensation. In most instances, benefit calculations are processed by computer and double-checked by CalPERS staff for accuracy.

CalPERS is the largest public pension fund in the United States with assets of more than $110 billion. The retirement roll is 350,000 payees per month, made up of retirees, beneficiaries and survivors. The System has a total of more than 1 million members.

CONTACT: CalPERS Office of Public Affairs

Mark DeSio/Pat Macht, 916/326-3991