San Diego pension reform compromise

Speaking at a news conference, Sanders said he would ask the council to consider a compromise deal next week which would eventually save taxpayers US$23m annually.

In May, Sanders unveiled his proposal for a hybrid pension system for all non-public safety employees hired by the city after 1 July 2009 (www.globalpensions.com; 29 May 2008).

Sanders, who planned to ask the council to advance his proposal for voters to decide in a November ballot, wants to introduce a system borrowing elements from both the city's traditional defined benefit system, as well as a new defined contribution plan.

The mayor's proposal dramatically reduced costly benefits by basing retirement pay on an average of the last three out of five years of compensation; disincentivising early retirements by lowering the multiplier to make it unattractive to retire early; and mandating equal contributions by employees.

Additionally, it lowered the cap on benefits that employees could receive from the city's defined benefit system from 90% to 75%.

Under the compromise deal the hybrid system would be introduced, and the multipliers would still be substantially lowered, but the cap would be 80%.

Contribution rates would be set by the San Diego City Employees' Retirement System (SDCERS) and the actuary for both the city and employees.

A new defined contribution plan would be established by the city, to be administered by SDCERS with a mandatory city contribution of 1% and a mandatory matching employee contribution of 1%.

Sanders said the agreement meant the reforms would not have to go to ballot in November.

He said: "This compromise helps us achieve the same underlying principles that I always thought were critical.

"The plan helps shift the risk away from taxpayers and it reduces some of the costly retirement benefits associated with the current system."