City workers pay into retirement fund

Back in the halcyon days of this city's budget process – when ever-increasing property and sales tax revenues allowed officials to build up a reserve fund in excess of $30 million – the city's workers were granted a generous perk that significantly boosted their take-home pay.

The city began picking up each employee's portion of the amount required to fund retirement benefits under the Public Employees Retirement System, which totaled a 7 percent pay hike, with deductions for withholding and payroll taxes taken since 2007.

Now, with a much tighter municipal budget, the city's 93 employees again will contribute a percentage of their paychecks to fund their retirement benefits: 2.5 percent starting July 1 this year and an additional 2.5 percent July 1 next year, for an eventual total of 5 percent.

The city will continue to contribute the amount shy of the 7 percent requirement, as well as the city portion, which lately has approached 14 percent, although the latter number varies, depending on calculations from retirement system actuaries.

However, the employees – which include six management, 21 mid-management and 66 “miscellaneous” workers – won't suffer a pay cut as a result of the increased deductions. The new pact includes a 3 percent “cost-of-living” adjustment retroactive to January and another 3 percent hike next January.

Also, furlough days, which cut salaries 5 percent, ended September 2012, and vacation buy-backs will be reinstated. The suspended pay-for-performance program will be “reconsidered” during the upcoming budgeting process for the 2013-14 fiscal year.

Negotiations could be reopened before the contract expires Sept. 30, 2014, regarding a furlough program, and interestingly, the Jan. 9 local holiday for Richard Nixon's birthday was switched for the Martin Luther King, Jr., national holiday.

Both full and part-time employees working 30 hours will contribute $75 per month retroactive to January, with an additional $75 per month starting in 2014 for the health benefits package.

The city contributes $1,020 monthly for a “cafeteria plan” that is used to pay health insurance premiums, with any residual amount paid either as cash or applied to deferred compensation.

The retirement plan currently in use is a “2 percent at 55” formula, which allows employees full retirement benefits at age 55 based on two percent of the highest year of compensation multiplied by the number of years worked.

Employees hired after Jan. 1 this year will fall under a new state-mandated formula of 2 percent at age 62, with the highest compensation year figured on a three-year average, although new workers already in PERS can apply the older formula.

Cost to the city for the salary hike less the new employee PERS contributions will total $704,180 through September 2014. The one-time estimated costs for vacation buy-backs could be up to $150,000, taken from an employee leave reserve fund that now totals $1.4 million.