Nutter applauds arbitration award for correctional officers

We just got this release from Mayor Nutter, hailing a new arbitration award for the city's 2,000 correctional officers. The Inquirer wrote about this today, but one thing we think is interesting is that in addition to putting new hires on a hybrid 401K-Pension plan, current workers will have to start paying in more towards the traditional pension fund.

This is the direction the city would like to go with the city's municipal workers, who have been working without contracts . Wonder if this will put any more pressure on them?

Here's the release:


Award calls for new pension plan for new correctional officers, more employee contributions for correctional officers under current plan and overtime reform.

Philadelphia, March 21, 2012 – Mayor Michael A. Nutter hailed an interest arbitration award governing wages, hours and working conditions for almost 2,100 correction officers, youth detention counselors and security guards in Local 159 of AFSCME District Council 33 as an “historic” decision that brings much needed reform in the areas of pension and work rules while meeting his goal of “a contract that is fair to employees and fair to the City’s taxpayers.”

The award creates a hybrid pension plan for new Local 159 employees – a plan that combines a defined benefit component along with a defined contribution benefit with the City matching a portion of the employee’s contributions to a 401K-like plan. In addition, current Local 159 employees will contribute more to their pensions, an increase equivalent to about one percent of pay.

“I am both grateful and encouraged that the Arbitrators clearly understood the City’s fiscal condition, and the need for structural reform in the areas of pensions and overtime,” Mayor Nutter said. “In addition, the Arbitrators recognized the need for the contract to generate savings in order to provide our highly valued employees with a wage increase. From the start, I have said that I will support fiscally sustainable contracts that are both fair to the employees and to the City’s taxpayers. This award meets that crucial test while also providing fundamental fiscal reform.”

After adding the new costs related to wage increases and a lump sum payment and considering the savings from pension and overtime reform, the net cost of this award is about $9 million more than was budgeted under the proposed Five Year Plan, FY2013 through FY2017.

The interest arbitration, issued March 16 by a three-person panel of Arbitrators, covers the period from July 1, 2008 through June 30, 2014. It does not provide any wage increases for the period July 1, 2009 through June 30, 2012.

Instead, it provides a $1,100 lump sum payment within 30 days of the award, a 2.5 percent pay increase on July 1, 2012 and a second increase of 2.5 percent on July 1, 2013. The award also provides that if District Council 33 should negotiate any wage increases for the period July 1, 2009 to June 30, 2012, members of Local 159 will receive the same increase.

In addition, members of Local 159 will again be entitled to step and longevity increments that were frozen by the Nutter Administration in July 2009. The increases will only accrue from the date of the award going forward and not from the point when they were frozen, owing to the City’s severe fiscal crisis brought on by the Great Recession.

With regard to the range of economic issues separating the City and Local 159, the Arbitrators noted that Union negotiators “presented no substantive economic evidence to challenge the economic evidence proffered by the City in support of the City’s claim that its economic condition is dire.”

The new municipal pension, known as Plan 10, has two components – a mandatory defined benefit and a voluntary defined contribution.

The new plan’s defined benefit has the following features:

• A limitation on years of credited service to 20 years;

• Average final compensation is based on a five-year period during which an employee’s compensation is greatest;

• New employees will contribute 50 percent of the normal cost of the Plan toward the defined benefit; and

• A new multiplier, 1.25 percent.

In addition, current employees will also now contribute 50 percent of normal cost, up from the current 30 percent, a change that will mean employees contributing approximately an additional one percent of pay.

The new voluntary defined contribution benefit provides for a $1 City contribution for each $2 employee contribution with the City limiting its contribution to no more than 1.5 percent of eligible compensation.

On overtime, the Arbitrators said that with the exception of vacation leave, no paid leave time, including holiday pay, sick time or administrative leave days, shall be considered hours worked for the purposes of determining when overtime is due. For example, employees who are out sick two days during a regular 40-hour week could not collect overtime during the other three days that week.

On the issue of health and welfare, the Arbitrators concluded that members of Local 159 should continue to receive health benefits as currently defined, leaving that issue for negotiations between the City and District Council 33.