- Employer contribution costs will be increasing a minimum of 31% over the next three years
- As an example, Miscellaneous Employee employer con(tributions will be increasing 22% (from 17.3% to 21.1%) – the suggested 2% employee contribution won’t even cover next year’s increase)
- Funding levels for all four accounts (Miscellaneous, Fire, Police, Medical) are all now in the range of 50-60% - substantially below the critical funding level of 80% - labeling this as CODE RED is not overstating the situation by any stretch
In addition to this news, CalPERS announced on Thursday the recommendation to lower their investment return assumption from 7.75% to 7.375%. While this doesn’t seem like much on the surface, it means the following (on top of the increases outlined above):
- Additional Employer Contribution increase of 300 basis points (14% cost increase) for Miscellaneous employees
- Additional increase of 600 basis points (18% cost increase) for safety personnel
City Management/Mayor and Council have acknowledged we have a pension issue that needs to be addressed, but the key question is whether/not they will move quickly enough to create a more equitable distribution of responsibilities between employees and taxpayers. The new January 2011 Miscellaneous Employee contract will be very telling. Hopefully we will see management’s concerns turned into concrete and substantial action.