Workers may pay for own pensions

As the political winds shift away from hefty retirement benefits for public employees, Newport Beach may boost the amount it gives the city’s largest employee union. But an important distinction — and likely the reason city officials agreed to the pension hike — is that employees themselves will pay for it.

The union that represents about 640 full-time city employees, essentially most city workers other than police and fire staff, was granted a half-percent increase in pensions, so members would be able to retire with “2.5% at 55” rather than 2%. Under such plans, employees who retire at age 55 can collect a percentage — in this case 2.5% — of their final-year salary, multiplied by the number of years they worked for the city.

Pension plans can be costly, so a key provision of this boost is that union leadership asked to apply some of a future pay raise to cover the added retirement costs. The council might not have agreed to the new contract otherwise, considering that Councilman Keith Curry recently suggested a charter change that would subject future pension increases to voter approval.

Curry did ask that the new city-employee contract, which the council approved Tuesday, include a clause so employees couldn’t try to change who bears the pension cost for 10 years. The contract gave employees an 11% pay raise over three years, but close to 3.5% will go toward pensions.

As governments worry about unfunded pension costs, employee-paid pension hikes are becoming the norm, Newport Beach Assistant City Manager Dave Kiff said.

It’s something of a windfall for those who are about to retire, while others just entering the system will end up paying more, he said.

“We all pay for it for each other, and there’s some people that will win, like those who are leaving the system soon, and some people that will pay for it” into the future, Kiff said.

Now that the council has approved the contract, it must be ratified by the union’s rank and file.