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From YouTube: San Bruno City Council Meeting October 23, 2012 10a. State Pension Reform Legislation Report
Description
San Bruno City Council Meeting
October 23, 2012
10a. State Pension Reform Legislation Report
A
B
Mayor
members
of
the
City
Council
and
councilmember
O'connell
on
skype,
I'm
pleased
to
present
you
with
a
short
presentation
on
the
pension
reform
bill
which
runs
about
39
single-spaced
pages.
We've
tried
to
condense
it
down
into
just
a
few
slides.
So,
as
you
can
see
from
the
first
slide,
this
was
recently
adopted.
It's
going
to
be
in
effect
or
start
being
in
effect
at
the
beginning
of
the
year,
and
it
covers
pretty
much
all
state
pension
plans,
not
not
all
of
them,
but
most
of
them
and
we'll
talk
about
the
ones
that
it
doesn't
cover.
B
B
So
the
takeaway
from
that
is
that
in
essence,
cities
across
the
state,
including
San
Bruno,
essentially
assume
the
risk
that
changing
demographics,
variations
and
investment
returns
and
so
on
won't
exactly
match
purses
actuarial
model
that
they've
used
to
set
the
rates
for
any
particular
year.
So
that's
why
the
city
sees
fluctuating
rates
over
time
and
why
employees
pay
a
fixed
percentage.
B
So,
let's
just
take
a
quick
look
at
how
pers
itself
has
done
over
the
years,
and
the
answer
is
not
not
too
bad.
Considering.
There
are
a
lot
of
other
pension
funds
that
are
in
worse
shape
than
pers
they're
about
75%
funded
for
both
miscellaneous
and
safety,
and
purses
position
is
that
the
unfunded
liability
is
really
an
accounting
issue,
not
a
solvency
issue.
B
The
reason
for
that
is,
they
don't
have
to
pay
the
entire
amount
out
in
one
year
or
even
five
or
ten
or
twenty
years,
it's
essentially
a
very,
very
long
term
system,
and
so
it's
okay
for
them
to
be
in
the
neighborhood
of
about
75%
funded.
They
don't
have
to
be
a
hundred
percent
funded.
The
other
piece
of
good
news
from
pers
is
that
their
average
rate
of
return
over
the
last
30
years
has
exceeded
what
they've
assumed
by
about
two
percent,
and
so
that's
pretty
good.
B
However,
as
you'll
see
in
the
next
slide
that
average,
that
actual
rate
of
return
really
fluctuates
significantly
and
that's
what
causes
their
investment
return
to.
Look
like
this,
so
we're
hoping
that
nobody
here
in
the
audience
or
at
home
has
an
IRA
or
an
investment
fund
whose
performance
looks
like
this.
That
would
be
a
very
volatile
fun
to
have,
but
purse
can
have
it
because
they
have
such
a
long
investment
horizon.
This
is
not
the
kind
of
performance
volatility
that
you
would
even
expect
or
want
for
your
own
pension
fund.
B
The
effective
of
this
volatility
is,
it
does
affect
the
employer
contribution
rates
on
a
yearly
basis
and
we'll
see
why
that
is
in
just
a
minute.
So
let's
talk
about
the
actual
law
and
what
it
what
it
doesn't
do.
First
of
all,
it
doesn't
affect
public
entities
that
have
their
own
non
state
pension
system.
There
are
a
few
of
those.
B
There
are
charter
cities
where
the
electorate
can
set
pension
benefits
and
those
are
the
ones
you
tend
to
read
about
in
the
newspaper,
San
Francisco,
San,
Diego,
San,
Jose
I
think
they've
got
something
on
the
ballot
there,
and
the
new
law
does
not
affect
the
vested
rights
of
current
members
of
either
pers
or
other.
What's
called
reciprocal
pension
systems
and
all
the
reciprocal
system
is
is,
is
one
that
says.
If
you're
in
our
system,
then
you
can
transfer
over
into
pers
or
some
other
system
that
has
that
reciprocity.
B
So
the
bottom
line
is
no
changes
to
current
retiree
benefits,
no
changes
to
benefit
formulas
or
optional
benefits
for
current
members,
absent
some
sort
of
collective
bargaining
and
the
employee
contribution
rates.
The
eight
and
nine
percent
that
we
saw
on
the
slide
before
our
are
not
required
to
be
changed
until
2018,
and
even
that
with
a
few
caveats
and
we'll
look
at
that
in
just
a
second
all
right.
So
let's
take
a
look
and
see
how
the
law
affects
current
san
bruno
employees.
So
the
first
thing
is:
the
law
requires
that
is
an
employee.
B
You've
got
to
contribute
at
least
half
of
the
normal
cost
of
your
pension
by
2018,
but
what
the
law
does
is
set
a
cap
of
eight
percent
for
miscellaneous
twelve
percent
for
safety.
Well,
if
you
remember
from
the
previous
slide
miscellaneous
already
paying
eight
percent,
so
under
the
new
law,
they
wouldn't
have
to
pay
anymore,
even
though
eight
percent
isn't
necessarily
half
of
the
normal
cost
of
the
pension
now
or
may
not
be
in
the
future.
B
As
far
as
safety
is
concerned,
right
now
they're
at
nine
percent,
they
could
go
to
12,
but
that
has
to
be
collectively
bargained.
So,
there's
a
little
bit
of
ambiguity
in
the
law
about
whether
the
the
city
can
impose
that
in
2018
or
whether
there's
some
other
process
that
will
have
to
be
used
and
the
the
most
of
the
opinion
at
the
moment
is
that
it
will
have
to
be
bargained
for.
So
that's
how
it's
going
to
affect
current
employees.
B
It's
also
going
to
affect
current
employees
because
they
won't
be
able
to
purchase
service
credit
after
the
first
of
the
year.
So
if
you're,
a
city
employee
in
this
city
or
anywhere
else
in
the
state,
if
you
want
to
buy
that
extra
service
credit,
now
is
the
time
to
do
it.
There's
no
retroactive
pension
enhancements.
If
you
can
get
convicted
of
a
felony,
you
don't
get
part
of
your
pension
and
you
can't
come
back
to
work
as
an
employee
except
under
limited
circumstances.
So
that's
how
the
law
affects
current
san
bruno
employees.
B
Let's
take
a
look
for
a
second
and
see
how
the
law
is
going
to
affect
new
members.
That
is
new
members
in
pers
people
who
have
never
been
in
pers
before
or
in
any
other
reciprocal
system.
What's
going
to
happen
after
the
first
of
the
year,
and
the
answer
is
that
for
those
new
people
coming
into
the
system,
there's
a
new
retirement
formula
for
miscellaneous
employees,
as
you
see
two
percent
at
62
maximum
benefit
of
two
and
a
half
at
67.
So
right
now
the
city
has
a
more
favorable
formula
than
that.
B
The
new
safety
formula
is
going
to
be
2.7
at
57,
and
employees
aren't
going
to
be
able
to
use
their
their
highest.
Your
performance
in
terms
of
pay
they'll
have
to
average
over
three
years.
In
addition
to
that,
they
can't
use
overtime
or
other
kinds
of
payouts
to
enhance
their
pension
and
their
income.
That's
pensionable
is
going
to
be
captive
132,000.
So
that's
a
significant
difference
for
new
members
that
come
in
and
there's
really
just
a
couple
of
other
changes.
B
There's
no
supplemental
plans,
oftentimes
cities,
would
would
adopt
other
defined
benefit
plans
in
order
to
supplement
purrs
and
you're
not
going
to
be
able
to
do
that
anymore.
For
new
members
who
come
in
after
the
first
of
the
year
and
then
last
but
not
least,
our
contributions
to
a
deferred
comp
plan,
like
a
457
plan,
is
no
longer
going
to
be
invested
right.
It's
not
frankly
clear
that
it
was
a
vested
right
to
begin
with,
but
the
law
makes
it
clear
that
employers
can
are
free
to
to
change
that
if
they
wish
all
right.
B
So,
let's
take
a
look
and
see
how
the
new
law
is
going
to
affect
the
city's
pension
costs,
if
at
all.
Well.
First
of
all,
the
new
law
only
applies
to
these
new
members,
people
who
have
never
been
in
pers
or
any
other
reciprocal
system,
but
we're
told
by
the
human
resources
department
at
about
eighty
percent
of
the
city's
new
hires
in
the
past
five
years
were
actually
new
members,
and
so
what
that
tells
us
is
if
that
trend
continues.
B
Over
the
longer
term,
we
are
going
to
see
a
decrease
in
those
pension
costs,
because
most
of
the
new
hires
are
new
members
that
are
going
to
be
subject
to
the
new
and
less
expensive
rules.
However,
the
short
term
costs
are
likely
to
increase
that.
Why
is
that?
Well,
pers
says
that
it's
going
to
increase
for
the
employer
about
half
a
percent
25
percent.
That's
a
pretty
big
swing,
in
fact.
That's
an
order
of
magnitude.
B
Afterward
and
the
lows
are
smoothed
out
over
several
years,
so
they
don't
catch
up
with
each
other
and
that's
why
you
see
the
rates
going
up.
So
finally,
what's
next
we've
yet
to
see
whether
there's
going
to
be
in
effect
on
retention
or
recruitment?
We
don't
know
the
answer
to
that
yet
and
I
think
it's
safe
to
say
that
it's
not
over
yet
I.
Think
that
you'll
see
some
additional
legislation
for
some
more
reforms,
especially
to
have
the
employees
take
on
some
of
that
risk.