County employees hired after April 17 will receive lesser benefits than current workers under a so-called two-tier pension plan approved Tuesday by the county Board of Supervisors.
The two-tier system will affect 1,334 positions in three unions represented by the San Luis Obispo County Employees Association. The county has more than 2,400 workers.
Taxpayers will not see the budget-saving benefits for years, perhaps decades, when the as-yet-unhired employees begin to retire and current employees are long gone.
This is the second and by far the largest move to establish a second tier for county employees. As of Jan. 1, 350 unrepresented management, elected, appointed, and professional employees’ positions went into a two-tier system. Seventy-five percent of county jobs now are covered.
Supervisors praised their employees for signing off on the plan, especially at a time when, as Chairman Adam Hill put it, “it’s fashionable to beat up on public employees.”
Supervisor Bruce Gibson called the two-tier system “a tremendously significant step” and “a constructive reaction to a new reality.”
Over the long haul, this move will save the county up to $20 million, according to Tami Douglas-Schatz, human resources director and the county’s chief negotiator.
“The savings will be fully realized in 20 to 30 years, after a second tier has been implemented for all bargaining units,” Douglas-Schatz wrote in a report to the supervisors.
Some savings, Douglas-Schatz added, “will be realized in eight to 10 years, depending on retirement and hiring trends.”
The two-tier system is part of an aggressive campaign to control the county’s “perpetually increasing future pension system cost,” as Douglas-Schatz described it.
Among the changes:
Final retirement compensation will be based on the highest three-year average rather than the current highest single year.
The cost of living adjustment will be limited to 2 percent with no carryover; currently it is 3 percent, with a carryover option.
The 2 percent at 55 option will change to 2 percent at 60. That means that a person retiring at 60 will receive 2 percent of his salary for every year worked, so long as he or she has been employed for five years or longer.
The Deferred Retirement Option Program will disappear. DROP allows employees who have achieved the maximum retirement benefit to continue to work but suspend all employee and employee contributions to the pension plan for five years.
About 60 percent of the county’s operating budget is personnel costs.
Some cities also are reforming pensions. The Morro Bay City Council in February reduced its retirement contribution to newly hired firefighters. The council reduced the city’s contribution from nearly 35.2 percent to 15.6 percent. It was the first city in the county to do so.