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Friday, July 12, 2013

Employees pay or city pays?

Paying their own portion

We've seen blogs, newspaper comments and media interviews that praise Costa Mesa’s employees for “picking up all of their retirement costs.” What does that actually mean?

They're supposed to pay

California's pension systems require public employees to pay 8 to 10 percent of their gross pay toward their pensions. Law enforcement officers may pay more because they are able to collect full pensions earlier in their careers and receive more generous benefits than other workers.

"People may think the employees are paying 8 percent. Well, it turns out (some) are not," said Joe Nation, a public policy professor at Stanford University. Some unions (associations) have negotiated special deals that require the city to pay both the employer’s and the employee’s portions of the retirement assessment.
This benefit has become so egregious that state lawmakers banned the practice for anyone hired after Jan. 1, 2013. The state retirement system for teachers has never allowed it.

Paying all of their retirement costs?

So, are the employees in Costa Mesa paying all of their retirement costs? Kind of.  The employees are actually paying, in most cases now, their own portion of their retirement investments.

Compare to private sector

If that sounds like what the private sector does, it should. However, in the private sector, the investments become effectively a trust fund for the individual’s retirement. If poor investments were made, there will be less cash available. And, the money decreases over time as savings are depleted.

The retired City employee is guaranteed their income, with increases every year for inflation – at least for the rest of their life. That is, their income goes up, not down. And, the guarantee is based upon their earnings in the last year of work, including accumulated vacation, overtime (much overtime is accumulated during the last year!) and various special pays.

They're now paying their mandated share

So, what the bloggers, commenters and union president are saying is, the City no longer pays the employees’ portion of a very lucrative retirement program. That’s different from, “now paying all of their retirement costs.”

Are the employees evil for enjoying lucrative pensions? Of course not, they, like entrepreneurs, seek the best return for their time and efforts. Are their unions evil? Again, no. The unions (associations) are businesses that seek maximum income by increasing membership and increasing fees or dues. The fees may be difficult to increase without garnering attention (perhaps by blocking and chest-bumping visitors at a City Council meeting). Negotiating sweetheart deals works even better.

Who did it? 

Who’s responsible, then? Much like our Congress when Obamacare was proposed, our elected representatives accepted what others, including the union, told them instead of doing due diligence. That was then.

Now, under Costa Mesa’s COIN ordinance, the final responsibility falls on the citizens of Costa Mesa

If the Council agrees to “sweetheart deals” in the futurewe'll know. We can use the referendum process to block the giveaways.

And then we’ll be responsible to “throw the rascals out.”

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