The Placer County Board of Supervisors took an important step in its drive to keep county pension-plan costs under control Tuesday when it approved a new two-year contract with the Deputy Sheriff’s Association.
The county and association agree in the contract to create a two-tier pension system that will provide somewhat less generous retirement benefits to future employees hired by the county, but will help ensure the county’s benefit costs can be sustained in the long term.
At Tuesday’s meeting, the board also approved using the two-tier approach for department heads, management employees and other employee groups who are not represented by labor organizations. In each case, the new tier would be used only for future employees.
The two-tier plan was part of the county’s last, best and final offer to the Placer Public Employees Organization, a labor group that represents about 75 percent of the county workforce. The board voted Sept. 7 to impose terms of the county’s final offer to the PPEO after negotiations reached an impasse.
Placer County expects to have a two-tier pension system in place for all employee groups early next year.
Local governments throughout California are looking at two-tier pension systems and a host of other options for ensuring they can pay the cost of employee benefits in the future without curtailing public services dramatically. The issue has taken on special urgency because of budget challenges created by the nation’s economic downturn and the state’s ongoing budget crisis.
Placer County and DSA negotiating teams reached a tentative agreement on a two-year contract Oct. 7. The DSA announced on Oct. 29 that its rank-and-file membership had voted overwhelmingly to ratify the agreement.
At Tuesday’s meeting, 5th District Supervisor Jennifer Montgomery said she was pleased to approve the agreement. “It has been a long time coming, longer than my tenure on the board,” she said.
The DSA represents about 225 employees, including sheriff’s deputies, sergeants, district attorney’s investigators and welfare fraud investigators.
The two-year contact will not have a big impact on existing employees represented by the DSA because their salaries are set by Measure F, a voter-approved initiative that ties wage hikes to salaries for comparable positions in three other counties: Sacramento, El Dorado and Nevada.
In the contract approved Tuesday, Placer County agreed to continue providing full coverage for employee dental benefits, but current DSA employees will pay any cost increases for dependent coverage. Current DSA employees also agreed to reduce the monthly compensation they receive if they opt not to have county health insurance. In return, the county agreed to a small increase in its pension contributions for existing DSA employees.
Under the two-tier pension system, DSA employees covered by what is known as the Safety Plan currently can retire at age 50, but future employees would have to wait until at least 55.
Future DSA employees covered by the Miscellaneous Plan, the retirement plan for most county employees, would be eligible for retirement at age 55, just as current employees are. Benefits for future employees, however, would be calculated by multiplying the years of service by 2 percent, rather than the 2.5 percent used for current employees.
In addition, pension benefits for future employees in both the Safety and Miscellaneous Plans would be based on the highest or final three-year average compensation exclusive of overtime and any lump-sum payments. The single highest year of compensation exclusive of overtime and lump-sum payments is used for current employees.
Under the two-tier pension, future DSA employees will contribute larger percentages of their salaries than current employees to help fund their retirement benefits.
In the past, the county agreed to pick up increasing percentages of employee pension contributions for current employees when economic conditions were good and pension payments to CalPERS were low. The county cannot afford to continue that practice into the future, so new hires will begin to pay 100 percent of the employee contribution for their pensions and current employees began to contribute more for these benefits in the last year or so.
The county will continue to pay the major portion of pension costs for all employees, including future hires, and these employer contribution rates will increase each of the next three to five years.
Adopting the two-tier system for future DSA employees is considered particularly important because the county will need to hire approximately 40 new deputies to help operate the jail being built at the Bill Santucci Justice Center in Roseville. The county expects to save approximately $500,000 per year by applying the new pension formulas to the deputies who are hired to staff that facility.