LOS ANGELES — The nation’s largest public pension fund has agreed to pay up to $2.7 billion to refund policyholders hit with huge hikes in their premiums, it was announced Tuesday.
The California Public Employees’ Retirement System, or CalPERS, has agreed to settle a class-action lawsuit over the fee hikes that were imposed on nearly 80,000 people who paid for policies to cover the long-term costs of nursing care and included “inflation-protection” coverage, according to a joint news release from CalPERS and the plaintiffs.
A judge must approve the deal, which could happen sometime next year, according to the release.
Several policyholders sued in 2013 after CalPERS notified them that their premiums would jump by 85% over two years beginning in 2015.
CalPERS said it needed to raise the premiums to keep the expensive long-term care policies solvent. The fund has suspended new enrollment and plans to implement two more rate increases as early as this November and next year that could nearly double the premium cost, the Sacramento Bee reported.
CalPERS, which has some $470 billion in assets, provides pension and other retirement benefits to more than 2 million employees of state and local agencies and public schools, retirees and their families.
However, the money for the settlement won’t come from those assets, which cover pensions, but rather from a separate long-term care fund of nearly $5.5 billion, according to the news release.
“We believe this settlement is in the best interest of all long-term care policyholders and represents a sincere effort to resolve very complex issues in a fair manner,” Matthew Jacobs, CalPERS general counsel, said in the release.
The settlement “will help our clients, many of whom are retired and on fixed incomes, to achieve a refund of premiums and move on with their lives,” said Gretchen Nelson, one of the attorneys in the case.
If approved, the settlement would avoid a jury trial in the case scheduled for March of next year.
The amount of money for each person covered by the settlement will depend on several factors, including whether they used the benefits for which they were paying.
Under the deal, most policyholders would receive between $35,000 and $50,000 but would have to give up their long-term care insurance plans to receive full payment refunds, the Bee reported.
Policyholders can opt out of the settlement and keep their plans, but few are likely to take that route, Stuart Talley, an attorney representing policyholders, told the paper.
“We’ve received so many phone calls from people who say they want their money back, and they want to get out of this program,” he said.