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Here are some follow-up items on the retirement board’s study on the “purchase of service credit” benefit, which an actuary estimated to account for $146 million of the city’s $1 billion pension deficit.
- City Attorney Mike Aguirre, an longtime critic of the benefit, has drafted legislation that would force the service credit benefit as well as the “deferred retirement option plan,” known as D.R.O.P., to be a neutral cost to the city rather than a loss.
Under the program, an employee can purchase up to five years of service at a specific rate, based on a percentage of one’s salary, in order to bolster future pension pay. For example, someone who works for 20 years and purchases five years will receive a pension reflecting 25 years of service.
The legislation is Aguirre’s answer to Mayor Jerry Sanders’ request to cut the program’s cost to the city. Under the city attorney’s proposal, an employee’s payout from the program would be altered so that it equals the amount the worker paid for the service credit.
This contrasts with the solution that the retirement board will study. The panel said it will consider resetting the price of service credits, which would allow employees to know the amount of years they are purchasing, although it would come at a different price. The retirement board has decided to stick with the current prices for service credits until, at the earliest, next summer.
- We reported that the benefit has languished because Aguirre held up the paperwork that was needed to prevent new hires from purchasing service credits.
In fact, it had languished until Aguirre drafted the legislation and the council passed it in January, more than a year and a half after the new rule was supposed to take effect.
As a result of the delay, employees who were hires up until Feb. 16, 2007 are allowed to buy service credits, retirement system spokeswoman Rebecca Wilson said. The cutoff was supposed to be July 1, 2005.