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
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.