LOS ANGELES (AP) – The country’s largest public pension fund has agreed to pay up to $ 2.7 billion to reimburse policyholders affected by huge increases in their premiums, it was announced on Tuesday.
The California Public Employees’ Retirement System, or CalPERS, agreed to settle a class action lawsuit over fee increases that were imposed on nearly 80,000 people who paid policies to cover long-term nursing costs and included “inflation-protection,” according to a joint press release from CalPERS and the plaintiffs.
A judge must approve the deal, which could happen next year, the statement said.
Several policyholders took legal action in 2013 after CalPERS informed them that their premiums would increase by 85% over two years from 2015.
CalPERS said it needed to increase premiums to maintain the solvency of expensive long-term care policies. The fund has suspended new listings and plans to implement two more rate hikes as early as November and next year, which could nearly double the cost of the premium, the Sacramento Bee reported.
CalPERS, which has some $ 470 billion in assets, provides retirement and other retirement benefits to more than 2 million state and local agency and public school employees, retirees and their families.
However, the settlement money will not come from those assets, which cover pensions, but rather from a segregated long-term care fund of nearly $ 5.5 billion, according to the press release.
“We believe this settlement is in the best interests of all long-term care policyholders and represents a sincere effort to resolve very complex issues in a fair manner,” said Matthew Jacobs, general counsel for CalPERS, in the statement.
The settlement “will help our clients, many of whom are retired and on fixed incomes, get a refund of premiums and get their lives back on track,” said Gretchen Nelson, one of the lawyers in the case.
If approved, the settlement would avoid a jury trial in the case scheduled for March 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 forgo their long-term care insurance plans to receive full reimbursement, the Bee reported.
Policyholders can opt out of the settlement and keep their plans, but few are likely to go that route, Stuart Talley, an attorney representing policyholders, told the newspaper.
“We’ve had so many phone calls from people saying they want their money back and they want to get out of this program,” he said.