City proposes two-tier pension system

Proposal would put new hires in a reduced benefits tier
By: Jon Brines, Placer Herald Correspondent
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The city of Rocklin is moving forward with pension reform despite some big hurdles ahead that would require state legislative action. Rocklin City Manager Rick Horst released results of a pension reform plan developed by a citywide committee which has met over the last two months. The plan would create a two-tier retirement system where new hires would be placed in a reduced benefit tier. The final retirement salary would be based on the three highest years worked instead of the single highest paid year of their career. One recommendation would require city employees to pay their share of the California Public Employees’ Retirement System contribution. Right now the city pays it as well as the city’s portion for most employees, excluding City Manager Rick Horst. According to Horst, in the last 10 years the city’s annual pension costs jumped from $185,884 per year to $3,577,004, or an increase of 1,824 percent. Horst said increased benefit formulas, large losses on pension investments due to the Great Recession and the increased life spans of retired employees have ballooned city costs which are unsustainable. Rocklin helped create the proposal as a co-contributor to a regional approach to pension reform, according to Horst. “It is important that we take a regional approach to this issue to avoid employee recruitment and retention issues,” Horst said. “Obviously, if one city, say Rocklin, reduces benefits via ‘reform’ and another city does not, that city would have an edge on recruiting new personnel and perhaps entice existing personnel to leave Rocklin for better benefits.” Rocklin doesn’t want to recruit and train new personnel only to lose them later to a city that provides a greater benefit package, Horst said. The League of California Cities, of which Rocklin is a member, will consider the plan for formal adoption at their annual conference next month. If adopted, the league will then place this item as a formal legislative issue and push the agenda with the state legislature, according to Horst. Reportedly, 61-percent of League member cities are negotiating pension reform, five cities have already moved to a two-tier pension system. The plan calls on the state to restore the sustainability of pension program through various measures, including the elimination of pension spiking which watchdog groups have accused Rocklin of in the past. One suggestion is calculating benefits only on base salary and not include overtime, vacation or sick leave in pension calculations. Last year the city paid its former City Manager Carlos Urrutia $120,931 on top of his base salary for excess leave time, along with other employees. The plan also calls for eliminating the ability to purchase time not served. The city included this function in its 2010 early retirement deal, which allowed two years of extra service credits for early retirement buyouts of five top managers. Rocklin Council member Scott Yuill said the pension committee shows the city is committed to long-term pension reform. The city wants the state to eliminate retroactive pension increases and increase PERS benefit formulas for miscellaneous employees as well as safety employees among other measures. It’s unclear if the measures will make any headway before the state Legislature. Senator Ted Gaines (R-Roseville)has been advocating for pension reform since the state financial crisis began. Horst is hoping the city’s unions will get on board as well. “I suspect the report findings and recommendations will be a part of discussions with bargaining units prior to next year’s budget,” Horst said.