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Last night, the City Council made important progress towards fair and meaningful pension reform. We approved pension agreements with the City's Management Association, Confidential Employees, Attorneys Association, and the Prosecutors Association that will result in new employees paying the full employee share of their pension costs, a lower benefit formula, and an increased retirement age. These are significant reforms for these employee groups, and I want to thank them for working with us to solve our long-term financial challenges.
Additionally, the Mayor and City Council voluntarily reformed our pension system to increase our CalPERS pension contribution to 8% of payroll.
The agreements for these four groups will consist of the following changes:
- New employees will pay the full 8% of their salaries for their pension costs, increasing from the current level of 2%.
- New employees will retire with a benefit formula of 2% for each year worked, as opposed to the current formula of 2.5%.
- New employees will be eligible for full retirement at age 60 rather than the current age of 55.
- Employees final compensation will be based on a three-year average of their salary, not the year in which they earned the most.
While these are important reforms, we still need to reach agreement with our largest miscellaneous employee group the International Association of Machinists. In addition, we are hopeful that by working together as a city team, we can also achieve reforms with our Police and Firefighter Unions.
These next few years will be difficult, but I am confident that our employee groups understand this, and want to work with us on meaningful pension reform.
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