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Here’s the Plan: Is It Good for You or Good for Them?

Editor’s Note: Read the plan the City Council will vote on today to sweeten the package for 2,400 city workers to get them to retire early. It gives the unions until 2026 to repay the pension and other costs by raising their contributions from 6 to 6.75 percent during that period. The deferred wage increase element similarly will make city workers whole within five years. Will this really solve the city’s budget and pension fund crisis?

EARLY RETIREMENT INCENTIVE PROGRAM (ERIP) MANAGEMENT PROPOSAL 6/25/09

1. The goal of ERIP is to separate 2,400 employees from City service as quickly as possible.
2. Benefit enhancements as provided on June 22,2009
(see attached). Add $15K to Scenario E.
3. Accumulated Sick and Vacation time will be paid out over two separate tax years.
4. Employees shall only have the retirement option to select ERIP during the window period (the
choice to select the standard LACERS retirement shall not be allowed during the ERIP window
period).
5. Window period of 45 days.
6. Management shall determine the order of the retirement dates for employees electing to retire
during the window period.
7. After all employees who enroll for the ERIP have retired through the program, the LACERS’
actuary shall determine the total cost of the ERIP by calculating the difference between the
increase in the Unfunded Actuarial Accrued Liability (UAAL) and the decrease in the Normal
Cost (based on the actual employees retiring from ERIP and including the backfill assumptions
provided by the actuary). This cost shall be an obligation of the Unions.
8. The additional cash components of ERIP shall be an obligation of the Unions.
9. Payment for the two obligations identified in items 7 and 8 above will commence on
July 1, 2011 and end on June 30, 2026 or until the sum of the obligations identified in items 7
and 8 are fully paid, whichever comes first. The payment shall consist of an increase in the
active employee retirement contribution rate of three-quarters (3/4) of one percent (0.75%).
10. The employee contribution rate for employees hired prior to 1983 (i.e. defrayal group) shall be
adjusted to 6% upon ratification of this agreement. Commensurate with item 9 above,
employees in the defrayal group (similar to all other employees) shall have their retirement
contribution increased from 6% to 6.75% on July 1, 2011. Savings from the elimination of
defrayal shall be credited towards the target savings figure (in items 7 and 8 above).
11. Once the City has recouped all costs associated with the ERIP as identified in items 7 and 8
above, the retirement contribution rate will be reduced by 0.75% to 6% for all employees.
12. As part of its Normal Cost calculation, the LACERS’ actuary will provide an update on the cost
(identified in items 7 and 8 above) and savings (identified in items 9 and 10 above) so that
contribution rates may be adjusted accordingly to account for shortages and surpluses
collected towards the payment of the ERIP. The actuarial updates shall not occur later than
October 1, 2016, and October 1, 2021. The City and Unions will meet at least once annually
after the release of the actuary’s report to assess the progress on eliminating the obligation.
13. Certain classifications will be excluded and/or capped at 20% (see attached lists).
14. Each Union shall conduct its own membership vote. Ratification by each bargaining unit must
be completed and the CAO notified in writing of ratification within three weeks of Council
approval. Units representing a majority of the LACERS members must ratify all of theEARLY
provisions of the retirement package. Compliance with this provision will be based on the
Wages and Count for full-time employees dated November 17, 2008.
15. An Early Retirement Incentive Program that is cost-neutral to the City is a critical element
of the parties’ collaborative partial solution to the City’s long-term economic viability.
Therefore, the parties agree that should there be a successful legal challenge to either
mechanism (end of defrayal or increased employee contributions) designed to ensure cost
neutrality, the parties will meet under the Mutual Gains process to discuss and agree on
alternative measures to ensure cost neutrality. Should the parties fail to agree on
alternative measures that will ensure cost neutrality within 60 days of the City’s exhaustion
of all appeal options in the state court system against a successful legal challenge, the
City may invoke established bargaining practices to ensure cost neutrality as envisioned in
this agreement, i.e., payment of the actual incremental cost of the ERIP and any refund of
previous payments toward this goal required under the successful legal challenge.

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4 Responses to Here’s the Plan: Is It Good for You or Good for Them?

  1. Anonymous says:

    Council passes early retirement plan–L.A. Times
    City Council OKs early retirement deal despite opposition
    1:19 PM | June 26, 2009
    The Los Angeles City Council voted this afternoon to move ahead with a plan to give early retirement to 2,400 employees while postponing raises for another 22,000, in hopes of balancing the budget without laying off workers or closing City Hall two days a month.
    Meeting behind closed doors, the council unanimously voted to forward the proposal to the Coalition of L.A. City Unions for a ratification vote by its members, two council members said. The deal would then return for a second council vote.
    “We can’t afford not to do it,” Councilwoman Janice Hahn said, minutes after the vote.
    Still, representatives of one union said his members would probably file a legal challenge to the proposed agreement, a copy of which has not yet been released by city officials.
    “The [early retirement plan] that they’re proposing is not legal,” said Bob Aquino, executive director of the Engineers and Architects Assn., which represents roughly 7,800 city workers not included in the negotiations.
    Aquino accused the council of excluding some unions from its early retirement talks. And he warned that the council has not been provided with a legally required actuarial study that would spell out the long-term cost of the plan to the city’s pension system, which is projected to consume an increasingly large share of the city budget over the next five years.
    Los Angeles Mayor Antonio Villaraigosa plans to have a news conference on the agreement this afternoon.
    The proposed labor pact applies to civilian workers, including those who provide such services as trash pickup, park maintenance and library operations. Negotiations are still under way for police officers, firefighters and other unions.
    Aquino’s warning echoed comments made two days ago by Gary Toebben, president and chief executive of the Los Angeles Area Chamber of Commerce. Toebben said he has asked for financial information on the proposal but was told by the mayor’s office and council members that such information was confidential until negotiations were over.
    “The public deserves a very thorough briefing when the council gets out of their closed-door session about what impact this will have on the budget over the next five years,” he said today. “Because, ultimately, the taxpayer will end up paying the bill. They’re not in the room. But they’ll end up paying the bill.”
    Councilman Richard Alarcon said the plan would be less painful for the public than a furlough plan, which would force workers to take 26 unpaid days off in the coming year.
    “We’re doing our best to save city services,” he said.
    The chairwoman of the Coalition of L.A. City Unions, whose pact was being reviewed by the council, disagreed with Aquino’s assertions. She said representatives of the Engineers and Architects Assn. were present for the early retirement talks.
    Meanwhile, Villaraigosa and Council President Eric Garcetti said this week that they expected that union members remaining with the city would cover the full cost of the early retirement program. Workers hired before 1983 would see their pension contribution hiked to 6% from a range of 2% to 4%, while other city employees would see their contribution to the pension system increase from 6% of their pay to 6.75% in July 2011.
    Backers of the plan said the city has already ordered an updated actuarial study, which will not be completed until after today’s meeting.
    The proposed agreement with the Coalition of L.A. City Unions is designed to dramatically reduce the possibility of layoffs and avoid furloughs, which would have forced the city to shut some city offices every other Friday.
    Under the proposal, the coalition’s 22,000 members would not receive raises for two years. Those workers would then receive six raises between July 2011 and January 2014, along with two cash payouts.
    To reduce payroll costs, the city would offer early retirement to workers who are as many as five years away from being eligible for retirement. To entice them to leave, the city would offer some workers cash payouts and, in some cases, credit them with enough years of service to qualify for retirement ahead of schedule.
    City officials have been increasingly anxious over the rising costs of retirement benefits for its two pension systems — one covering public safety workers, the other for civilian employees.
    A May report from the city’s top financial advisor warned that the city’s required pension contribution — money that comes out of the same budget used to pay for basic services — could jump from approximately $660 million next year to more than $1.6 billion by the 2013-2014 fiscal year. That increase “far exceeds any projected revenue growth” and is not sustainable, the city’s acting administrative officer, Ray Ciranna, wrote.
    A favorable vote by the council would immediately send the labor pact to coalition members for ratification.
    – David Zahniser and Maeve Reston at Los Angeles City Hall

  2. Anonymous says:

    Terrible news.

  3. The http://www.irs.gov site is excellent for any information you will ever need, including instructions for the 1099. They will also recommend a number of online services for electronic filing, one of which that I’ve used with ease for a couple years..

  4. The http://www.irs.gov site is excellent for any information you will ever need, including instructions for the 1099. They will also recommend a number of online services for electronic filing, one of which that I’ve used with ease for a couple years..

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