Pension Reform

By Casey J. Lucius

Articulate desired savings, then begin transitioning from a defined benefit plan to a defined contribution plan

There are two important questions that need to be asked and answered before we can proceed with meaningful reform.

1) Is the City of Pacific Grove providing any benefits that it is not legally obligated to provide? 2) How much savings is the City trying to obtain through reform?

If the City is providing benefits that it is not legally obligated to provide (i.e. accrued benefits are not pensionable benefits), then it could save money by legally cutting the cost associated with such pay.

How much the City wants to save should determine the type of reform we seek. It has never been stated whether Pacific Grove is trying to save $800,000 per year or $8 million per year. This is important to developing a strategy to achieve the desired results.

The League of California Cities has recommended that local governments begin a hybrid benefit plan that transitions employees from a Defined Benefit Plan to a Defined Contribution Plan. I agree with this recommendation. The City of Pacific Grove could negotiate with employees to cap the benefit plan at 70% of an employee's salary. The difference would then be made up by city contributions, preferably capped at 10%. If there is still a gap in contributions, we could eliminate employee contribution caps allowing them to contribute up to 16% (same as federal employees) to make up the remaining difference. This would be a legal way to begin pension reform that could apply to both new and current employees.

We definitely need to implement effective pension reform - there is no doubt about it! But we also need to do this in coordination with our city employees. Creating a collaborative environment will better facilitate cooperation in future negotiations between the City Council and City employees.