What Happened?
The city of Phoenix has a ballot measure aimed at reforming its public employee pension system, attempting to save more than $600 million over the next 25 years.
So What?
Proposition 201 would change the Phoenix Employee Retirement by limiting how much rising pension costs would have on the city’s general fund. The proposal would raise the retirement age for city workers and increase the contribution amount they put toward their pensions, hoping to relieve some of the financial burden of the city and protect capital that supports daily services such as police and fire.
Breakdown of the Reforms
Currently, public employees can contribute up to 5 percent of their paychecks to the pension system, countered by a 20.1 percent portion from the city annually.[dw-post-more level="0"] If the proposal passes, new public employees would pay an equal 20.1 percent and match the city’s pension contribution. The reform would only affect newly hired public employees, and not apply to police officers, firefighters or elected officials, who participate in a state-run pension system. Other components of the reform include:
- Employees can only retire when a combination of their age and years of service equals 87, up from 80
- Employees can retire at age 60 with 10 or more years of service, and 62 with five or more years – with the pension amount reflective of how long worker served
- Change the formula used to calculate pensions to encourage long-term service
- Increase flexibility of investment options for city officials in the plan
- Allow the city to contribute more than required in a profitable year to pay down unfunded liability
Aftermath of California Pension Reforms
Last year, California passed its Public Employee Pension Reform Act of 2013 that changes retirement options for public workers. The statewide pension reforms have raised controversy in several counties where labor unions have brought lawsuits against pension fund boards. Labor unions argue the implemented changes to retirement options and rules for current employees already in the pension system are unfair, forcing California Attorney General Kamala Harris to file a notice of intent to intervene to subdue the lawsuits.
Reform Details
Under the reforms, current, new and retired state employees:
- Retirement benefits for public workers who commit a job-related felony may be forfeited
- After 180 days, a retiree may return to work in a critically needed position, but cannot work more than 960 hours a year
- Service performed prior to the date of enacted retirement benefit increases will not apply
- Employees will pay at least 50 percent of the normal cost to fund the retirement benefit
- Regulation prohibiting non-represented employees from receiving better health benefits than represented workers
Furthermore, new state employees:
- Retirement formulas with benefits will be based on the highest average 3-years compensation
- Social Security Wage Index used to determine the cap on annual compensation used to calculate benefits
- Elimination of replacement benefit plan for workers who exceed benefit limit
- Closes the 24-month alternate retirement program for new hires
- Stop to legislator’s retirement system to new members
Other Pension Stories
Gov1 has followed pension reforms nationwide as municipalities struggle to control unfunded liabilities.[/dw-post-more]