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Council looking at possibly lowering CalPERS

By: Stephanie Dumm News Messenger Reporter
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Potential new hires within the city of Lincoln could be looking at a lower pension rate than existing employees. That’s according to a decision made by City Council on Tuesday night to shift the California Public Employee Retirement System (CalPERS) system from 2.7 percent at 55 to 2 percent at 60 for the city’s miscellaneous employees. The council adopted a resolution of intention to lower the CalPERS retirement formula for future employees. “Earlier this fiscal year, council provided direction to the city manager to look into the creation of a second tier retirement benefit for any new hires,” City Manager Jim Estep said. All but one of the bargaining units in the miscellaneous group supported the two-tired system, according to Estep, and that sole unit was the classified unit. Estep said the decision to move toward a two-tired retirement formula “is a permissive rather than a mandatory subject of bargaining as the changes only affect future employees and not current staff members.” Estep sent a letter to Local 39 representative James Britton, who represents the classified group. The letter stated that the city is moving forward with the two-tiered retirement benefit, and does not to have the classified group’s support because bargaining for benefits of future hires is not mandatory. Britton told The News Messenger on Friday that the one of the reasons the classified group didn’t agree to the two-tier system is “their contract is not open to make a change to any way.” “The main sticking point behind having a two-tier system is with their group, it wouldn’t take very long for it to be lopsided on a two-tier structure,” Britton said. “The new hires would outnumber the older folks and it breaks down the relationship with employees to have a different structure for retirement, benefits and salary.” Britton said if they new hires outnumbered the existing employees, a vote could be made to reduce or remove the retirement benefits. The labor group representative also addressed Estep’s statement that the decision to move toward a two-tired system is permissive rather than mandatory. “My response to Mr. Estep was that it was under the act that covers public employees in city or county that they have to bargain a term and condition with employers until they in good faith reached an impasse or an agreement,” Britton said. Estep said the new pension formula would cause the employer contribution “to drop substantially,” from 14.366 percent per year to 6.755 percent. According to the staff report for the item, “the cost savings will be found through the new employer rate paid for the future second-tier employees and as existing employees retire or otherwise leave city service for other endeavors.” Estep said other options could be considered besides a two-tiered pension system. “One suggestion is to get out of PERS completely, and that first requires the City Council to pass a resolution of intent before they give us any information on what it would cost (to leave),” Estep said. “Once that was passed, we could go to PERS for a new actuarial on what it would cost to leave the system and it could take three months up to a year.” Richard Mackirdy, a Lincoln resident, questioned that information. “I’m wondering if I heard that statement correctly. It seems to me that I hear PERS will not talk until (the city) voted to get out,” Mackirdy said. “That doesn’t seem quite right. We need to look into that further.” Estep gave an explanation as to why this was. “You need to pass a resolution of intention to leave. They (CalPERS) don’t want to put a lot of work into that until they know you are seriously looking at doing that,” Estep said. The second option besides the 2 percent at 60 formula was to have a second tier of employees who don’t have retirement benefits but have a “defined contribution program,” according to Estep. He said that is similar to a 401K. Estep said CalPERS does offer a defined contribution program, but if current employees have the retirement benefit, future employees must have it too. Councilman Gabriel Hydrick said he would look further into the possibility of leaving CalPERS. “What this ultimately comes down to is our future generations and posterity,” Hydrick said. Before city staff brings a resolution of intent to leave CalPERs, Councilman Tom Cosgrove said the city would need to ensure asking the question of how much it would cost to leave CalPERS isn’t “an unfair legal practice.”