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San Jose To Implement Pension Reform For New Hires

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San Jose City Hall

San Jose City Hall (City of San Jose)

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SAN JOSE (CBS SF) — The San Jose City Council passed an ordinance Tuesday that will implement a second tier pension plan for new employees.

Scheduled for the consent calendar after being approved on a first reading earlier this month, the ordinance represents one part of the Measure B pension reforms passed by 70 percent of voters in June.

City spokesman David Vossbrink said it is difficult to estimate just how much money will be saved by the new ordinance, since it depends on how many new employees are hired and when.

“It doesn’t do a thing for the pension costs that we’ve already accrued, those are big numbers that will continue to grow because there are thousands of people in the system,” Vossbrink said.

Rather, Vossbrink said, the new plan will provide long-term savings.

The ordinance deals with a new pension plan that will apply to all future San Jose non-safety employees, who will have an annual accrual rate that could not exceed 2.0 percent of salary for each year worked, with a 65 percent maximum retirement payout. Under the ordinance, new city employees will also be eligible for retirement at age 65, compared to 62 for current employees.

The vote comes amidst a flurry of response to the June passage of the Measure B pension reform, which was championed by Mayor Chuck Reed.

Immediately after voters approved Measure B in June, union representatives filed state lawsuits on behalf of police, firefighters and non-safety city employees contesting the legality of the pension reforms. The result of the lawsuits is still pending.

The passage of Tuesday’s ordinance also comes on the same day that public pension reform made headlines statewide, as Gov. Jerry Brown outlined a plan for state pension reform that would include caps on benefits, increasing the retirement age, making employees pay at least 50 percent of their pension costs, and stopping what it calls “abusive practices.”

Reed expressed support for the governor’s proposed pension reforms.

“The pension reform agreement is a significant accomplishment for the governor that will have a positive impact,” Reed said.

But how much impact Reed’s reforms will have in San Jose has been the subject of some debate. Last week, a state audit of San Jose’s pension system indicated that a retirement cost projection used by Mayor Reed was likely overstated.

According to Vossbrink, the estimate Reed used when he said that retirement benefits could cost San Jose $650 million by the 2015 fiscal year was never meant to be interpreted as a formal estimate, nor was it used by the city as such, though the city did employ a number of models to generate a number of different projections.

(Copyright 2012 by CBS San Francisco and Bay City News Service. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

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