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Sonoma County taking small step toward pension reductions

Published: Tuesday, November 20, 2012 at 7:47 p.m.
Last Modified: Tuesday, November 20, 2012 at 7:47 p.m.

The Sonoma County Board of Supervisors took tentative action Tuesday to reduce the cost of pensions for a small group of future employees.

The board authorized a new, lower set of benefit formulas for future hires who carry over from other government retirement systems their years of service and eligibility for benefits.

Because those employees make up a sliver of the future workforce, the change alone would put only a minor dent in the county's pension costs.

But it could be the first official overhaul of the county retirement system among the slate of more significant cost-saving measures proposed in contract talks or mandated by state law to take effect Jan. 1.

Supervisor David Rabbitt called it a “small but important part” of the county's plan to rein in skyrocketing pension costs.

Provided unions agree, the new benefit tier would apply to those employees hired after Dec. 31.

The change would affect a small segment of the future workforce. Only about 12 to 13 percent of county employees come to their job with previous government service that makes them eligible for benefits from Sonoma County. That carryover is allowed under so-called “reciprocal” agreements common among city, county and state agencies in California.

The change alone is expected to save the county a marginal amount off its annual pension costs, starting at an estimated $100,000 in the first year and growing to about $780,000 by 2022. The county's current annual contributions to its pension system are $47.9 million. Including payment on pension bond debt, total annual costs are about $94 million, or more than 400 percent what they were in 2000.

The change is not expected to lower the county's current unfunded pension liability, set last December at $353 million.

But county supervisors and officials argued that it does provide some savings to taxpayers and closes a loophole in state-mandated pension reform. Without the board action, officials said, those new hires covered under reciprocal agreements would have been eligible for the better pension benefits owed to all current employees.

Other government agencies throughout the state have been acting to close the same loophole, said Rabbitt, who cast a similar vote recently in his board post on the Golden Gate Bridge Highway and Transportation District.

In Sonoma County, current workers can retire at age 60 with 3 percent of their salary for every year worked. For public safety workers the benefit is the same but the retirement age is 50.

Under the new formulas for qualifying future hires, those formulas would change to 2 percent at age 61.25 for general employees and 3 percent at age 55 for public safety employees. These employees would retain benefit levels earned from previous employers for prior service.

The change would also come with some reduction in the employee cost of pension contributions, now at about 12 percent of pay for both groups. The reduction would be equal to about 2.6 percent of pay for general workers and 0.4 percent for public safety workers.

The board action did not address benefit formulas for the larger group of future hires — those without previous government service that qualifies them for benefits. Under state legislation approved this year, those new workers as of Jan. 1 are set to go to even lower benefit tiers, providing for general employees 1.8 percent of salary for every year worked at a retirement age of 60, and for public safety employees 2.5 percent of salary for each year of service at age 55.

The new state law also mandates changes in how pensions are calculated, including limits on what kind compensation can be factored into pensions. In contract talks, the county is seeking more aggressive limits that would also affect current employees.

Now more than seven months in for the county's largest labor group, those negotiations continue to grind on, with employees facing proposed concessions equal to 3 percent of their total pay and benefits.

County officials said they did not expect unionized employees to oppose the pension changes for future hires authorized Tuesday. A similar change is to be authorized next month for future hires not represented by bargaining groups.

Of Tuesday's vote, Supervisor Mike McGuire said, “This is another part of the puzzle to look at short- and long-term savings as regards to our unfunded liability.”

You can reach Staff Writer Brett Wilkison at 521-5295 or brett.wilkison@pressdemocrat.com.

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