“As we negotiate in the future, we will have evidence of what the people think,” said Hawn in an interview with PublicCEO. “There are lots of polls out there, but this is the best way to get the citizens of Modesto to chime in on the issues. These advisory votes will help whoever is mayor bargain with union leadership more effectively.”
Now, City Attorney Suana Alcala Wood has had an opportunity to review the three measures and has produced three impartial analyses.
Moving the city’s existing defined benefit retirement plan to a defined contribution retirement plan
Currently, the City provides its employees with a defined benefit retirement plan through the California Public Employees Retirement System. For purposes of clarification, a “defined benefit” retirement plan is one in which a variable amount (or percentage) of money is paid into a retirement fund each year by the employee and the City for the benefit of that employee. The amount paid to the employee at retirement is fixed based upon factors such as age, salary history and duration of employment. With this type of program, the City bears the risk of fund variation due to investment gains and losses, and the retirement allowance to the employee remains the same. By contrast, a “defined contribution” retirement plan is one in which a specific and certain amount (or percentage) of money is paid into a retirement fund each year by the employee and the City for the benefit of that employee. However, the amount paid to the employee at retirement cannot be pre-determined because, although the amount contributed is fixed, the amount in the employee’s retirement fund and retirement allowance will vary due to investment gains and losses and the employee bears the risk of this variation.
This advisory measure seeks the voters’ input on whether the Council should seek to move toward changing its retirement program to a defined contribution program. The ballot measure language itself lists a “401K style” plan as an example of one possible defined contribution retirement program alternative the Council could pursue.
Calculating retirement benefits based upon a single highest year salary or an average the last three years of salary
Currently, the City’s contract with the California Public Employees Retirement System allows for an employee’s retirement benefit to be calculated upon the use of the employee’s single highest year of salary as the baseline for the retirement allowance the employee will receive. This is in contrast to a retirement benefit that would require that an employee’s retirement benefit be calculated upon the use of an average of the employee’s salary over their last three years of employment. Use of a three-year average salary as a baseline may result in a reduced retirement benefit.
This advisory measure asks the voters to voice their opinion with respect to whether the City Council should seek to move a City employee’s retirement benefit calculation from a formula that uses a single highest year, to an average of the employee’s last three years salary.
Increasing the age of retirement to private-sector levels
This advisory measure asks the voters to voice their opinion with respect to whether the City Council should seek to increase the minimum age that any city employee must achieve before they are eligible to retire. The ballot measure asks the voters to advise the Council on whether the Council should seek minimum age retirement formulas that align with the minimum age retirement formulas used in the private sector.