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Administrative Services Finance Employee Compensation - Present and Future Costs
Employee Compensation - Present and Future Costs

Below are facts and figures regarding costs of City salaries and benefits:

Salary and Benefit information for 2011, Salary and Benefit Information for 2012Salary and Benefit Information for 2013 and Salary and Benefit Information for 2014 are now available online in order to provide the community a window into the City’s operations and finances. The information is listed by bargaining unit and includes the position, salary and all benefits. Please note that higher 2011 compensation for some employees compared with 2012 is due, for the most part, to one-time payments to retiring employees and to one-time payouts for reducing the City’s long-term costs for retiree medical benefits.

Several years ago, the City Council directed staff to find alternative ways to reduce City expenditures on employee benefits.  So far the City’s efforts have reduced estimated long-term employee costs by more than $100 million over a 40-year period. The City began cost-reduction efforts well before the state, in late 2012, passed legislation modifying the California Public Employees Retirement System (CalPERS).

In addition to the City’s efforts, state requirements that went into effect Jan. 1, 2013 will further reduce the City’s long-term costs, or unfunded liabilities. These requirements include increasing the retirement age for new employees; calculating pension payments based on an average of three-year’s salary, rather than the single highest year; and caps on pensionable salaries.

Below are details about the City’s progress in reducing long-term employee costs:

  • The City cut employee health benefits for all employees by introducing a “cafeteria plan.”  This plan provides the employee a fixed amount that can be used to purchase health, dental and vision care from a fixed group of providers.  If an employee wishes additional coverage he or she must cover the cost.  This program is estimated to save the City $2.1 to $4.8 million over the next five years.

  • The City reduced retiree medical costs through Alternative Retiree Medical Plan (ARMP), which buys out employees from the existing defined benefit program. Non-sworn employees (the program has not yet been offered to Police and Fire sworn personnel) hired before Jan. 1, 2010 were offered the value of their current retiree benefit in exchange for giving up their defined benefits when they retired.  Fifty eight percent of the eligible participants (178 employees) took advantage of this program.  In 2011, the one-time cost to the City was $5.6 million, but the reduction in unfunded liabilities over a 40-year period is $27 million.
  • The City capped costs for retiree medical coverage for employees hired after Jan. 1, 2010 by offering   defined contributions to a retirement health plan, rather than defined benefits.  A defined contribution deposits a set amount of money into a Retiree Health Plan (RHP) for the employee.  When the employee leaves the City, they take whatever has been contributed with them.  It is estimated that this program will reduce the City’s long-term liabilities by $66.2 million over the next 40 years.

  • The City has negotiated a two-tiered benefit system for Police, Police Management and Fire bargaining units by increasing retirement age from 50 to 55.  The two-tier PERS will save the City an estimated $790,000 a year, gradually increasing over time as new employees replace existing employees. 

  • Beginning July 1, 2013 (Fire) and January 1, 2014 (Police and Police Management) these bargaining units will begin paying a percentage of their PERS costs, saving the City with an estimated $3.5 million over the next five years.

Information on CalPERS financial performance can be found in CalPERS Facts

Unfunded Liabilities Explained