WALNUT CREEK -- The city council voted unanimously Tuesday night to add a lower tier retirement plan for newly hired police officers.
With the approved amendment to the California Public Employee's Retirement System contract between the city and its two sworn police bargaining units, new hires will have a retirement benefit of 3 percent at age 55. This means that their pension will go up 3 percent for every year of service if they retire after they turn 55.
Under the new two-tier system, benefits for current officers will remain unchanged.
The average salary for a specific period of time is used as part of the formula to determine the retirement benefits. For new hires, this will be a three-year period; for existing officers, their retirement benefit will be based off their last year's salary.
Under the new agreement, newly hired officers would be able to retire at age 50, but their benefits would go up only 2.4 percent for every year of service. The current employees under the old agreement would begin getting 3 percent raises in pension benefits for every year of service starting at age 50. As an example, new hires can now retire at age 55 with 25 years of service and get 75 percent of their salary in their pension benefit.
Existing officers under the old agreement, get a 3 percent raise in pension benefits at age 50. These officers could retire at age 50 with 25 years of service and get 75 percent of their salary. If they wait until 55, with 30 years of service, officers in the "first tier" would get the maximum, 90 percent of their final year's salary.
For the "second tier" plan, the 2012-13 employer contribution rate will be 21.802 percent of reportable earnings for new hires.
The estimated short-term cost savings to the city will be minimal. However, as current employees retire or leave for other reasons and are replaced by new staff who receive the second tier pension benefits, the city's savings will increase.
In September, Gov. Jerry Brown signed AB 340, authorizing statewide pension reform legislation including elements for capping benefits, increasing the retirement age, stopping abusive practices and requiring state employees to pay at least half of their pension costs. Many of the provisions are applicable to cities as well. AB 340 takes effect on Jan. 1, 2013.
Walnut Creek staffers are still trying to determine what effects AB 340 will have on city coffers once implemented.