Like Pleasanton, San Jose imposes two-tier pension plan for new employees
Original post made on Aug 29, 2012
Read the full story here Web Link posted Wednesday, August 29, 2012, 9:48 AM
on Aug 29, 2012 at 2:45 pm
Essentially what San Jose did was to take their pension plan (for new hires) back to where it was 12 years ago, before all the pension boosting madness took place in city after city in California.
Before the crazy era was induced by new laws, passed in Sacramento, all public employees had very good pensions. The they went crazy and mindless city councils handed over the keys to the city treasury.
Unfortunately, they made all those huge pension increases retroactive so that all the years prior to the boost got jacked up, even though no money had been put aside to cover it.
So, the retroactive feature worked in ONLY one direction, covering all the prior years. However now that the system is in trouble the changes don't affect those same workers who got all those free retroactive boosts.
Simply put it is really, no, REALLY unfair.
They should have had only the recent years at the unsustainable boosted rate. The years before and after that period should be at the sustainable rate.
They are walking away with $300,000 to over a million extra dollars over their expected lifetime of retirement.
Like huge golden parachutes for nearly all the workers with full careers.
on Aug 29, 2012 at 2:50 pm
Pleasanton did not impose, they negotiated with cooperative employee groups.
on Aug 31, 2012 at 5:22 pm
The problem is that government employers got a free ride when times were good.
When interest rates were very high, pension funds were invested so well that governments and employees were allowed to reduce or stop paying toward employee's pensions, because of the interest or return on the investments.
They did so well that CalPERS and other Retirement funds did not have to or charge the employers or the employees for years, and was worried that the State of Ca would "borrow" their money.
But when interest rates came down, pension funds just burned away their funds, and did not promptly ask employers to pay, or to pay enough. Eventually that caught up to them, and employers not only have to pay, they need to make up for some of the prior years of the free ride.
Yes, the employers need to pay more.
If you ask the employees to pay more, it really just costs more in the long run because that money comes out of their salaries, which the employer pays, and is taxed, too,
Employees did not cause the recession, and cutting the pensions that they are entitled to, based on years of service, will not solve today's problems.