Santa Maria’s efforts to reel in the ballooning costs of its employees’ retirement benefits took a major step when the City Council voted to adopt a two-tiered benefit plan on Jan. 18.
The City Council approved a resolution to reduce benefits to a lower level, two-tier system, which essentially shifts some of the existing costs to future employees.
With the vote, Santa Maria becomes the first city in Santa Barbara and San Luis Obispo counties to adopt such a plan, according to city officials.
Under the reforms, starting in July 2011, all new non-safety employees and police employees will be enrolled in the lower-tier pension plan. Also, new hires will pay into their pension fund, as opposed to the current practice of the city paying the employees’ shares, but the city will continue to pay the share of the employer.
Current city employees will retain their
existing plans.
In a recent press release, City Manager Tim Ness said the action was necessary to ensure the city’s eroding finances wouldn’t require deep cuts in existing services and programs.
All non-safety personnel currently participate in a CalPERS retirement plan that gives them 2.7 percent of their highest year salary, multiplied by number of years employed when when they turn 55 years old, and the city pays 8 percent of members’ contributions.
The new plan will be based on a 2 percent income retirement formula, where the employees pay the entire members’ contribution.
Sworn employees of the police department currently receive 3 percent of their income multiplied by number of years employed when they turn 50 years old, and the city pays the entire 9 percent of members’ contribution.
Under the changes, the newly hired officers will receive 3 percent income at 55 years old, with the employees again paying the member contribution.
The reforms don’t yet affect sworn fire department personnel, as the city continues its negotiations with the Santa Maria Firefighters Local 2020 for a similar two-tier system. According to Mark van de Kamp, management analyst for the City Manager’s Office, negotiations are expected to finalize in early 2011.
Van de Kamp said the city expects to pay $7.3 million in the 2010-11 fiscal year in pension-related costs. Thanks to recalculation adjustments by CalPERS, that figure is expected to jump to approximately $8.9 million in the 2011-12 fiscal year.
This article appears in Jan 27 – Feb 3, 2011.
