Health Benefits

ABSTRACT

This paper compares and contrasts the rapidly changing retirement benefits offered at three southern California City Agencies: San Diego, Riverside and Santa Barbara. The current retirement benefits package offered at the cities agencies not only differs between each other (externally), but also differ internally within the agency based on the type of position held and the date of hire. There is an underlining trend seen in all three agencies; a change in the benefits offered based on date of hire, with a decrease in benefits for newer hires. This paper will highlight the increase of retirement benefit costs for city employees and the overall reduction in retirement benefits across the board in all three agencies.

Since the Great Recession of 2008, the public sector has experienced greater criticism regarding both its pay and benefits from the general public, the taxpayer, than ever before. Pay and retirement benefits have become highly politicalized and has dampened the abilities of human resource managers to recruit and hire high quality, long-term committed employees. According to Berman et al. (2013), "civil servants have become the symbol of government excess". With this perception at the forefront of private sector workers ideology; who saw his or her entire life savings deflate to a quarter of its worth when the market crashed in 2008, it's hard to image how public agencies such as cities, counties and states, can justify what many outside the public sector consider the bourgeoisie of America- the government employee. This of course, is a misperception, as Berman et al. (2013) cites studies that show federal employees are underpaid by at least 26% (Losey, 2011). The most predominate method used by agencies to compensate for these lower wages historically has been more substantial benefit packages (pensions). But these retirement benefits have become the political target of a changing landscape in the public sector and the private citizen has called for changes which, are now seen in the adjustment of pensions provided to employees of the cities of San Diego, Riverside and Santa Barbara.

The most notable change in comparing and contrasting the retirement benefits of these cities was the passing of Proposition B, for the City of San Diego. Entitled "Amendments to the San Diego City Charter Affecting Retirement Benefits" ("City of San Diego, Prop B" n.d.). Proposition B required 50% of the voters in order to pass. In June 2012, Prop B passed by 65.8% ("Proposition B" June 2012) and becomes effective, June 30 2018. According to the Associated Press, in addition to the City of San Diego voting on pension cuts for public employees, the City of San Jose also voted on similar measure in June 2012 ("2 California Cities Vote..." June 2012).

A few of the measure included in Prop B include "limiting a City worker's base compensation used to calculate the employee's pension benefits to Fiscal Year 2011 levels and provide all new hires at the City, except for sworn police officers, with a defined contribution plan modeled after a 401(k) plan in place of a defined benefit pension plan" ("Proposition B" June 2012). In examining how this is presented in a job listing on the City of San Diego's website, the Assistant Planner position states under its benefits "City employees initially hired on or after the effective date of Proposition B, a voter-approved San Diego Charter amendment to modify City employee retirement benefits, will not be eligible to participate in the City's Defined Benefit Plan administered by the San Diego City Employees' Retirement System" ("Job Description" n.d.). Persons employed by the City of San Diego prior to the effective date of Prop B, are members of SDCERS, San Diego City Employee Retirement System. The system is divided into three categories for benefits: General, Safety and elected members. The Cities of Riverside and Santa Barbara have a similar divide within their pension systems for calculating benefits.

SDCERS benefits for general members (classified and unclassified positions for City of San Diego employees who do not meet the eligibility criteria for any of the Safety or Elected Officer plans), is further divided into three categories based the employees hire date; those hired prior to July 1 2005; those hired between July 1 2005 and June 30 2009; and those hired after June 30 2009 ("SDCERS Retirement Plan" n.d.). The benefits contribution rates are calculated by your age at entry to service and you must have 10 years of service credit to be eligible for SDCERS. In comparing the three hire period summary of calculated contributions for general members, I looked at age 20, 35, and 52. Out of the three cities, the San Diego City Employee Retirement System is the only city that utilized this benefit contribution method.

The table below shows the expected contributions by City of San Diego employees.

Date of Hire Age 20 Age 35 Age 52

Prior 2005 7.97% 10.89% 12.41%

2005-2009 7.97% 10.89% 12.41%

After 2009 4.00% 7.66% 10.72%

The contribution age at hire remain the same, thus if you were hired on in 2004 as a classified employee at age 20, your calculated contributions would be 7.97% until you retire.

The City of Riverside is part of CalPERS, the California Public Employees Retirement System. The cities retirement benefits formula is also divided into three categories: Local Police (Safety), consisting of three tiers; Local Fire (Safety), consisting of three tiers; and Local Miscellaneous, which is also divided into three tiers. The CalPERS is not a contributions based retirement system, it is a "defined benefit" plan. CalPERS used a "defined formula" to calculate benefits based on "a member's years of service credit, age at retirement, and final compensation based on the average salary for a defined period of employment" ("CalPERS Retirement Benefits" 2011.).

GROUP Retirement Formula *Effective Date

Safety Fire 2.7% @ 57

3% @ 55

3% @ 50

3% @ 55

2% @ 50 1/1/2013 (new members)

6/11/2011

6/2/2006

5/10/2002

6/27/1975

Safety Police