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Coalition of Santa Monica City Employees

Coalition of Santa Monica City Employees. Special Meeting with Members May 16, 17 & 18. Board Members & Alternates. Lauralee Asch—President Keith Kresge—Vice President Neela Patel—Treasurer Judy Silverman—Secretary. ATA Rod Merl Janet Hand EPP Craig Perkins MEA Robert Griffin

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Coalition of Santa Monica City Employees

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  1. Coalition of Santa Monica City Employees Special Meeting with Members May 16, 17 & 18

  2. Board Members & Alternates Lauralee Asch—President Keith Kresge—Vice President Neela Patel—Treasurer Judy Silverman—Secretary ATA Rod Merl Janet Hand EPP Craig Perkins MEA Robert Griffin Elke Hohls Jeri Wingo Byron Gamble MTA Tony Antich Joan Akins PAU Marty Tachiki Anthony Serritella STA Bill Bollinger UTU Adhi Reddy Martin Guerrero Rent Control Jenethen Pearl-Angulo

  3. Retirement Factoid • Statistics indicate most Americans enter retirement unprepared. • Most Americans rely on social security for their retirement but we know that social security benefits alone are NOT reliable or sufficient enough.

  4. Retirement Factoid Fortunately, your current PERS retirement is better than social security and what most other Americans have. But it is not good enough to ensure that you won’t need to get another job “to make ends meet” after you retire.

  5. PERS vs. Private Employer - Social Security 6.2%                     PERS FICA                              monthly pay rateyearly monthly           vs.            contribution July 2006-June 2007 - 2.7@55               $22/hr                   $45,760       $236.43                           $130.00       July 2007-December 2007 - 2.7@55               $23/hr                   $47,480       $245.88                           $173.33       July 2008 [assuming 4%COLA]               $24/hr                   $49,920       $255.72                           $159.47       July 2009 [assuming 4%COLA]            $25/hr                   $52,000                                              $173.33       Proposal An enhancement to the PERS formula is the most beneficial way to invest in your own retirement -- providing a guaranteed return.

  6. Our Current Formula2.0% @ 55 Allows retirement benefits to be paid at a rate of 2.0 % per year of service credit (at age 55) for the highest year of ‘PERSable’ salary. You are eligible for retirement at age 50 and after 5 years of PERS employment when ‘vesting’ occurs. The rate of the benefit increases with age, up to a maximum rate of 2.418% at age 63.

  7. Current Benefit: 30 year employee, age 55, earning $40,000/yr PERSable salary = $42,800 (with 7% PERS on PERS) 30 years x 2.0% = 60% of salary = $25,680 per year or $2,140 per month Example of Retirement Benefits2.0% @ 55

  8. Proposal The Coalition of Santa Monica City Employees is proposing that we increase our CalPERS retirement benefit from the current formula of 2% @ 55 to an enhanced formula of 2.7% @ 55.

  9. Proposed Formula2.7% @ 55 Allows retirement benefits to be paid at a rate of 2.7 % per year of service credit (at age 55) for the highest year of ‘PERSable’ salary. A person is eligible for retirement at age 50 and after 5 years of PERS employment, when ‘vesting’ occurs. The rate of the benefit increases with age, up to a maximum rate of 2.7% at age 55.

  10. As of June 1, 2007 Employee with 30 years, age 55, earning $40,000/yr PERSable salary = $43,200 (with 8% PERS on PERS) 30 x 2.7% = 81% of salary = $34,992 or $2,916 per month Difference of $776 per month or $9,312 per year. Example of Retirement Benefits2.7% @ 55

  11. PERS vs. Private Employer - Social Security 6.2%                     PERS FICA                              monthly pay rateyearly monthly           vs.            contribution July 2006-June 2007 - 2.7@55               $22/hr                   $45,760       $236.43                           $130.00       July 2007-December 2007 - 2.7@55               $23/hr                   $47,480       $245.88                           $173.33       July 2008 [assuming 4%COLA]               $24/hr                   $49,920       $255.72                           $159.47       July 2009 [assuming 4%COLA]            $25/hr                   $52,000                                              $173.33       Proposal This may be our last chance to enhance our retirement benefit. There is still a movement in Sacramento seeking to modify the CalPERS retirement system to deny members the opportunity to improve their retirement benefit formula above our current 2% @ 55.

  12. Retirement Info Could you retire at age 55 and live on 60% of your salary? Would 81% of your salary at age 55 be better? There is more than a 21% increase in retirement benefits for a 30 year employee under the 2.7@55 formula. Do you think that paying $222 a month out of future pay increases is worth getting $776 more a month for the rest of your life after you retire? (for a $40,000 per year employee).

  13. Cost of Enhancement Starting July 1, 2006: 2.5% of base salary Starting July 1, 2007: an additional 2.5% of base salary for a total of 5.0% Starting July 1, 2008: an additional 1.67% of base salary for a total of 6.67 % Thereafter: 6.67% of base salary per year

  14. Cost of Living Adjustments Assuming we get a 4% COLA for the next 3 years your base pay WILL increase by 12%. The deduction will be taken afterward. If we vote for this enhancement, in the 3rd year it will cost you 6.67% of your salary which will still mean a 5.33% increase in your paycheck.

  15. Cost of Living Adjustments In the 4th year (July 1, 2009) the entire COLA will be added to your base salary and the deduction will not increase beyond the 6.67%.

  16. PERS vs. Private Employer - Social Security 6.2%                     PERS FICA                              monthly pay rateyearly monthly           vs.            contribution July 2006-June 2007 - 2.7@55               $22/hr                   $45,760       $236.43                           $130.00       July 2007-December 2007 - 2.7@55               $23/hr                   $47,480       $245.88                           $173.33       July 2008 [assuming 4%COLA]               $24/hr                   $49,920       $255.72                           $159.47       July 2009 [assuming 4%COLA]            $25/hr                   $52,000                                              $173.33      

  17. Proposed Formula2.7% @ 55 The benefit is retroactive to cover ALL of your prior service years with the City of Santa Monica.

  18. 2 % @ 55 Age Formula 50 1.426 51 1.522 52 1.628 53 1.742 54 1.866 55 2.00 56 2.052 57 2.104 58 2.156 59 2.210 60 2.262 61 2.314 62 2.366 63+ 2.418…… Comparison of Retirement Benefits2% @ 50 vs. 2.7 @55 2.7% @ 55 Age Formula 50 2.00 51 2.14 52 2.28 53 2.42 54 2.56 55+ 2.70....

  19. Current 2.0% at 55 vs. Proposed 2.7% at 55

  20. PERS vs. Social Security • In 2005, the average Social Security benefit for retired workers in the United States was approximately $955/month, or $11,460/year. • Using 2006 salaries, this would give you a benefit equal to about 25% of your annual salary even though you may have worked 40 + years.

  21. PERS vs. Social Security Here’s what you would have to pay for this benefit if you were under Social Security: 6.2%SalaryFICA Tax July 2006-June 2007 $22/hr $45,760 $236/mo • July 2007-June 2008 $23/hr $47,480 $246/mo • July 2008-June 2009 [4%COLA] $24/hr $49,920 $256/mo • July 2009-June 2010[4%COLA] $25/hr $52,000 $266/mo

  22. Comparison of PERS Enhancement vs. Deferred Comp Investment

  23. Recommendation The Coalition Board recommends you vote “YES”

  24. Next Steps • Ballots have been mailed to ALL Coalition employees at their homes. • Informational meetings for members May 16th,17th & 18th. • All ballot envelopes MUST be signed to be valid. • Ballots must be received by May 25th to be counted. • If approved, the Umbrella Agreement will go to the City Council in June in order to facilitate pre-payment (effective July 1, 2006). • New PERS retirement formula would be in effect June 1, 2007. (Anyone who is an active City employee as of June 2, 2007 and then retires will be eligible)

  25. PERS vs. Private Employer - Social Security 6.2%                     PERS FICA                              monthly pay rateyearly monthly           vs.            contribution July 2006-June 2007 - 2.7@55               $22/hr                   $45,760       $236.43                           $130.00       July 2007-December 2007 - 2.7@55               $23/hr                   $47,480       $245.88                           $173.33       July 2008 [assuming 4%COLA]               $24/hr                   $49,920       $255.72                           $159.47       July 2009 [assuming 4%COLA]            $25/hr                   $52,000                                              $173.33       Tax Laws Require Employee Contribution to Be Taxed • Source: Human Resources Department • The contribution is taxed because it is the “City’s share” we are going to be paying to enhance our retirement benefit. • We can’t deduct the payment since there is no provision in tax law that would allow us to do so. • Thus, we can’t treat the payment as exempt from taxation. • If it was pre tax we would lose the PERS on PERS benefit • which is 7%, increasing to 8% with the new formula.

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