Affecting All Active Employees
TIER 1 – All employees hired PRIOR TO January 1, 2011; TIER 2 – All employees hired ON OR AFTER January 1, 2011
*EMPLOYEE BENEFIT REDUCTIONS OR COST INCREASES (unless specified, changes apply to both Tier 1 and Tier 2):
1. COLA Reduction — Reduces the annual Cost-of-Living adjustment (COLA) that enables retirees to keep up with the cost of living over the years of their retirement.
b. Tier 1- The COLA would be reduced from the current 3% annually to the higher of 2% or ½ the Consumer Price Index (CPI) with a 4% cap, compounded as it is now
c. Tier 2- No change: Lesser of 1.5% or ½ CPI, simple
2. COLA Freeze —
a. COLA delayed by 1 year and prorated by retirement month (i.e., an employee who retires on June 30th would receive 50% of their 1st COLA)
b. Downside Adjustment– Starting in 2020, if the funding ratio falls to 59% then COLAs are suspended altogether until the ratio returns to above 59%
3. Retirement Age–
a. Corrections and Police-
ii. Tier 1: Age 50 with 30 years of service (unchanged for Corrections; increased from 20 years of service for Police)
iii. Tier 1: Less than 30 years of service — Increased from 60 to age 62 (phased in over 4 years)
b. All Other Employees-
i. Tier 1: Age 55 with 30 years of service (increased from age 50; phased in over 10 years)
ii. Tier 1: Less than 30 years of service — Increased from 60 to age 65 (phased in over 10 years)
4. Service Multiplier–
a. Reduction – Effective immediately the service multiplier is reduced from 2.4x to 2.3x for all future years of service
b. Downside Adjustment — Starting in 2020, if the funding ratio falls to 59%, then service multiplier is reduced to 2.2x until the ratio returns to above 59%
5. Final Average Salary– Tier 1 Final Average Salary would be based on highest consecutive 8 years instead of current highest consecutive 4 years (phased in over 4 years)
6. Employee Contributions– Tier 1 and Tier 2 employee contributions increase by 1% in 2015 and additional 1% in 2016—raising total employee contribution from each paycheck to 10.5% (Police contributions increase by 1.5% to 10.5%)
7. Pension Salary Cap— Implements a cap for Tier 1 and modifies cap for Tier 2 so that pensionable salary is based on the greater of (i) Social Security Cap (currently $117,000); (ii) current salary on 1/1/15; or (iii) starting initial salary for new hires
*EMPLOYER COST/CONTRIBUTION INCREASES
1. Employer Contributions–
b. Increase fixed contribution from 1.54x to 2.2x (contribution includes health care funding referenced below)
c. Effective in 2020, employer contribution is the greater of the fixed contribution or an amount which will target a funding level of 85% in 30 years
2. Tier 2 Retirement Age—Reduced from 67 to 62 for Tier 2 Corrections and Police; from 67 to 65 for all other Tier 2 employees
3. Retiree Health Care Funding—Provides for a Healthcare Trust funded at $50 million a year with CPI growth
4. Upside Adjustments–
a. Tier 1- If the funded ratio reaches more than 100%, the COLA would increase to the higher of 3% or ½ CPI compounded, with 4% cap
b. Tier 2- If the funded ratio reaches more than 100%, the COLA would increase to the higher of 2% or ½ CPI simple, with 4% cap
*SYSTEM STABILITY
The County’s funding proposal does not guarantee the plan will reach a secure funding level:
• The County would maintain a fixed contribution until 2020 even if a higher contribution were needed. If the fixed contribution fails to be enough, then the plan will remain underfunded.
• Even reaching an 85% funding level is not guaranteed. The contributions will only target a funding level of 85% over 30 years; however the 30 years is on an “open loop” basis which means the 85% is a moving target that would be pushed back every year.