REGIONS: Novel California Pension Plan Provides an Inflation Antidote
IN CALIFORNIA, retired state and local government workers are benefiting from an innovative plan that helps keep pension income from being wiped out by inflation. But local governments, who pay the lion's share of the retirement benefits, think the system has serious flaws.</br></br>It's called IDDA, short for Investment Dividend Disbursement Account, and it's unique to California. The legislature this year voted to extend the plan until Jan. 1, 1994, despite grumbling by city and county governments and taxpayer groups. IDDA's fans note that the plan is paying an annual $127 million bonus to certain retired members of the Public Employee's Retirement System whose pension benefits have been eroded by inflation -- all without taking a dime from the state budget.</br></br>Critics say the trick is done by grabbing interest-bearing funds from employee retirement accounts before they get into the general retirement fund. As a result, employers end up paying more into pension funds than they otherwise would, the opponents say.</br></br>No one argues with IDDA's goal -- easing the financial strain of retired workers. A state employee who retired in 1975 with a $1,000 monthly retirement check has seen the purchasing power of that check cut in half. Regular and special cost-of-living adjustments have supplemented the monthly allotment, but these occasional payments cost the state a bundle without making up much of the considerable ground that elderly retirees have lost to inflation.</br></br>IDDA MAKES THE LOSS less severe. It kicks in enough money to bring retirees' monthly benefits to 75% of their original purchasing power. The retirement checks of about 95,000 ex-government workers are now receiving an IDDA boost.