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Petaluma to adopt tighter retirement benefits for new employees

Published: Wednesday, December 26, 2012 at 5:12 p.m.
Last Modified: Wednesday, December 26, 2012 at 5:12 p.m.

The Petaluma City Council in a special meeting Thursday is expected to vote to amend its contract with the California Public Employees’ Retirement System to create a second tier of benefits for future hires.

If passed, the changes would take effect Friday. The 8 a.m. special meeting was called to meet a Jan. 1 state deadline for cities to adopt lower benefits formulas for next year.

The changes, which cover non-public safety employees of the city’s largest union, AFSCME, require employees to work to age 60 — instead of 55 currently — and retire with a pension equal to 2 percent of their pay per year.

Employees agreed this month to the three-year agreement, which also switches to a three-year salary average for pension calculations instead of a single year.

Earlier, the city reached similar agreements with its police and fire unions. The second tier for those groups calls for a 3 percent maximum yearly accumulation at a retirement age of 55, up from age 50.

With the latest agreement, all new hires will be under the reduced pension calculation formula.

City leaders have acknowledged the savings from the changes are modest, but have maintained they are a step in the right direction to limiting the city’s pension liabilities.

Costs will decrease as the mix of first-tier employees falls and second-tier employees rises with new hires.

When the ratio becomes 50-50 for miscellaneous workers, the city’s contribution to pension benefits will decrease by about $203,000 annually.

At the same 50-50 ratio, changes to the public safety pension will provide an annual savings of $386,000.

Petaluma’s public safety employees contribute 9 percent of their salaries to retirement, while miscellaneous employees contribute 7 percent.

AFSCME’s agreement keeps wages static next year with the possibility of renegotiating pay in 2014 and 2015. The police union agreed this summer to forgo raises through June 2014.

According to the most recent analysis PERS provided the city, Petaluma’s 2011 unfunded liability was $46 million for public safety and $18.6 million for miscellaneous employees. That total of $64.6 million is a decrease from $75.3 million two years ago.

Unfunded liability is the portion of the pension benefit the city owes for future benefits but that hasn’t been paid into the retirement fund.

The meeting begins at 8 a.m. at City Hall, 11 English St. The pension item is the only issue on the agenda.

(You can reach Staff Writer Lori A. Carter at 762-7297 or lori.carter@pressdemocrat.com.)

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