Santa Monica City Council will vote Tuesday to make cuts to retirement and health care benefits for municipal employees after negotiations with employee unions stalled for more than a year.
Santa Monica and other California cities are trying to resolve multi-million dollar deficits between the pensions they promised workers and the value of CalPERS, the state’s public employee pension fund that suffered severe losses during the Great Recession. Local officials have proposed cutting a special pension benefit and covering less of employees’ monthly health care premiums in order to reduce Santa Monica’s $448 million unfunded pension liability and align with state reforms to prevent deeper pension shortfalls.
More than 1,800 city employees working in transportation, administration, management, law and other fields are subject to the retirement and health care contracts. Police officers and firefighters fall under a separate contract.
Teamsters Local 911 picketed the mayor’s annual State of the City Address last month over the proposed reductions in benefits, but representatives from the city’s coalition of unions ratified the retirement and healthcare contracts last Wednesday. The unions and the city declared an impasse in December 2019.
The new retirement contract will do away with a pension benefit that was previously eliminated at the state level for employees hired after January 2013.
More than 1,000 city employees hired before July 2012 receive the Employer Paid Member Contribution, which increases an employee’s reportable compensation to CalPERS by 8%. The city pays the employee an 8% bonus on their salary, which in turn increases their pension by 8%.
Employees hired after July 2012 do not receive EMPC. The city eliminated the benefit one year before the state Public Employees’ Reform Act prohibited cities from offering EMPC to employees hired after January 2013.
Ending the EMPC for an additional 1,000 legacy employees will reduce the city’s unfunded pension liability by $33 to $36 million, according to a staff report. The reduction in the pension liability is projected to save the city $1 million annually starting next fiscal year and at least $3 million by fiscal year 2023-2024.
City spokesperson Constance Farrell said employees reimbursed the city for the value of the 8% paid on their behalf and that reimbursement will now be paid back to employees over the next six years.
As part of the retirement benefits agreement, the city will also distribute a lump sum of $3 million among employees who were hired before July 2012.
Under the new health care agreement, the city will cover 92% of employee premiums instead of 93% and increase its payments by 2% per year to a trust that partially reimburses retired employees for their premiums.
The previous health care contract, which was executed in 2015, required the city to pay 93% to 94% of workers’ premiums. In 2015, an individual contributed between $30 and $50 per month and a family contributed between $80 and $130 per month, according to the contract.
The change to the health care plan will save the city $370,000 annually, according to the staff report.
City Council will meet Tuesday at 6:30 p.m. in the Civic Center East Wing, 1855 Main St.
madeleine@smdp.com
