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Employees Agree to Share Pension Costs

City employees will for the first time contribute to their own retirement benefits, under a three-year agreement covering salaries and benefits between the Municipal Employees’ Association and city that the City Council approved last Friday. The pact was effective July 1.

The new contract covering 106 workers, coupled with adjustments to salary and benefits for management, will save the city an estimated $315,000 over the next three years, according to finance director Gavin Curran.

Employees will also receive a 5 percent salary increase over the term of the contract, their first raise in four years. The raise will not completely offset the 8 percent contribution (9 percent for lifeguards) towards retirement benefits over the same period, said City Manager John Pietig.

The agreement reflects statewide concerns over ballooning municipal pension obligations and trends in public employee labor contracts. “Cities and employees should move toward parity” in pension contributions, and, at a minimum, workers should pay the employee portion of the contribution, recommends the Association of California Cities Orange County.

With this new agreement, Laguna’s employees will pay their full retirement contribution, while the city also contributes to its workers’ retirement fund, at 17 percent of pay for municipal workers and 22 percent for lifeguards.

Most of the members of the police and fire employees association already contribute towards their own retirement benefits, but at the lower rate of 2 and 4.5 percent, respectively, said Curran. Negotiations for a new contract are underway with firefighters; the police employee pact expires by Dec. 31.

Unlike retirement benefits, the city will continue to pay 100 percent of employees’ health insurance premiums and pay a greater share of premiums for employee dependents, 80 percent from 75 percent, according to the agreement’s terms.

The city does offer retirees health insurance, but they must pay 100 percent of their premiums. And, as of July 1, any new hires must serve the city for 10 years, rather than the previous pact’s three years, before becoming eligible for such coverage.

Scott Diederich, president of the Laguna Beach Municipal Employees’ Association, did not respond to requests for his comments about the agreement.

Salaries and benefits for the city’s management employees generally mirror terms negotiated by the union contract. To that end, the City Council last Friday signed off on adjustments to management salary and benefits that also include an incremental 5 percent salary increase and an 8 percent (9 percent for marine safety management) incremental contribution to retirement benefits over the next three years. The city will now pay for 90 percent of health care insurance premiums for management employee dependents, up from their prior contribution of 87.5 percent.

Additionally, reflecting our increasingly “wired” world, the City Council agreed to double the cell phone stipend for managers to $65 a month from $32.50.

Though pay and benefits for City Clerk Lisette Chel-Walker and City Treasurer Laura Parisi fall under the management category, the City Council sets the salaries for those serving in the two elected posts. They did so last Friday, and also included an incremental 5 percent salary increase over the next three years for both positions. In the current fiscal year, the city clerk’s salary is set at $8,739 per month, while the part-time city treasurer’s salary is set at $6,510 per month, which includes a 5 percent exceptional performance bonus approved last month.

City Manager John Pietig’s benefits are tied to management benefits, unless otherwise provided in his contract. He already contributes 2 percent towards his retirement benefits. Per a contract signed in December 2010, Pietig’s salary was set at $210,000 per year. The contract expires at the end of the year.

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