What’s in the pension reform deal?
http://www.seiu521.org/2012/pension-reform-deal/
Applies to all
1. Equal Sharing of Pension Costs: All Employees and Employers
New employees will be required to pay 50 percent of normal costs. Current employees will not immediately be required to pay 50 percent, but the employer can bargain to require current employees to pay any portion of the retirement contribution. There will be language allowing the employer to unilaterally implement an increased employee contribution, with certain limits, and this provision will take effect in five years.
The governor’s proposal called for current employees to start paying 50 percent of the costs immediately.
The hybrid plan, which included a 401(k)-style plan, will be dropped, and instead a reduced formula will be implemented. Workers may retire at 52 under a reduced benefit formula, collecting 2 percent at 62 and 2.5 percent at 67.
The governor proposal called for new employees’ retirement plans to be a hybrid of pensions and risky 401(k)-style plans.
3. Increase Retirement Ages: New Employee
Implements a 2% at age 62 defined benefit component of the hybrid plan for all new non-safety employees and adjusts the retirement formulas to encourage members to retire at later ages. The earliest an employee would be eligible to retire is age 52 (increased from age 50) and the formula tops out at 2.5% at age 67 (increased from 63).
4. Require Three-Year Final Compensation to Stop Spiking: New Employees
We support real pension reform and oppose pension “spiking.” All new employees will fall under the three year final compensation rule as proposed by the Governor. Pension benefits for some public employees are still calculated based on a single year of “final compensation.” That one-year rule encourages games and gimmicks in the last year of employment that artificially increase the compensation used to determine pension benefits. The new plan will require that final compensation be defined, as it is now for new state employees, as the highest average annual compensation over a three-year period.
5. Pension Cap
The annual salary on which a worker’s pension can be based will be capped at $110,000 for those in Social Security and $130,000 for those not in Social Security.
Cities, counties, and other local jurisdictions will have the option of offering an additional benefit to those who make more than the cap. That option will not be available for state workers.
The governor’s proposal had called for implementing a 401(k)-style plan for new employees.
Also in the deal:
• Retirees can work a maximum 960 hours per year.
• Felons will lose their pensions.
• No more retroactive pension enhancements.
• No more “pension holidays” that allow employers and employees to skip contributions when pension funds are flush.
• Additional service credit purchases will be eliminated.
