SAN DIEGO Mayor Jerry Sanders is proposing to switch new non-safety employees to a hybrid pension system that includes a lower-paying defined benefit plan, a mandatory 401(a) defined contribution plan and a voluntary 401(k) plan.
Under the mayors proposal, new city employees benefits would get fewer benefits from the existing $5.05 billion defined benefit plan. The city would contribute 3% and employees would contribute 1% of pay into the mandatory defined contribution plan. The 401(a) assets would be managed by the San Diego City Employees Retirement System and the investment managers that invest the defined benefit plan assets, said Fred Sainz, the mayors press secretary. Officials close to the system said the retirement systems board is investigating what steps officials would need to take to implement the mayors proposal.
Employees also would have the option to contribute to a 401(k) plan, called a points-matching plan, in which the city would match employee contributions based on employee age and years of service up to a maximum of 2.5% of pay. Employer contributions would vest in both defined contribution plans at the rate of 20% per year for five years.
Existing city employees could voluntarily opt into the new system.
Mr. Sanders proposed the new system because he said the current pension system is underfunded by $1.2 billion. The new plan also would lower the citys investment risk and be more in line with the plans offered by the $237.5 billion California Public Employees Retirement System, Sacramento, he said at a March 3 press conference.
The plan requires City Council approval and must be included in union contracts now being negotiated. The unions representing city workers have not agreed to the plan. In mid-April, the retirement system changes will be submitted to the City Council as part of a three-part compensation package that includes salaries and health benefits. The City Council has the choice to vote for or against the entire compensation package, Mr. Sainz said. If approved, all new employees hired after Jan. 1, 2009, will be under the new system, Mr. Sainz said.
Contact Arleen Jacobius at [email protected]