Thursday, December 25, 2014

Nutter takes aim at pensions of nonunion employees

Today, Mayor Michael Nutter is asking City Council to make big changes to the pension plan offered to nonunion city employees. This includes departmental deputies, top-level management, and many of the people who work for elected officials.

Nutter takes aim at pensions of nonunion employees

Today, Mayor Michael Nutter is asking City Council to make big changes to the pension plan offered to nonunion city employees. This includes departmental deputies, top-level management, and many of the people who work for elected officials.

Currently, these workers are covered by essentially the same pension plan as the union-represented white collar workers. If Nutter gets his way, that will change dramatically.

The proposed changes - which include the creation of a voluntary 401(k)-type plan and higher employee contribution rates for those who opt to stay in the city's pension plan - would apply only to new hires, not current workers.

So there is unlikely to be much in the way of budget savings for the city, at least at first. But the Nutter administration contends the proposal has the potential for significant long-term savings, particularly if large numbers of employees opt to sign up for a 401(k)-type defined contribution plan instead of the traditional pension.

According to the Inquirer, employees would be required to contribute more to the pension fund if they refused to enter into the hybrid plan.

If approved by City Council, the legislation would raise the pension contribution rate for new nonunion city workers from 1.85 percent to 3.3 percent.

For those workers who chose the 401(k)-type option instead of a pension, the city would contribute 50 cents for every dollar an employee contributes to his or her retirement plan. The city match would stop once an employee has contributed more than 3 percent of gross annual pay to the retirement plan.

The new plan will save the city money, but the article also points out that there are other options available that might reduce costs even more.

When asked why the administration had not pursued more sweeping changes to the retirement plan of nonunion workers - such as mandatory participation in a 401(k)-type program for new hires - [Finance Director Rob] Dubow said the city wanted to treat its employees consistently.

Speaking of those other employees: They outnumber the nonunion employees pretty dramatically, and there's more savings to be had in their pensions. The city was able to get similar changes to the Fraternal Order of Police's contract, and wants to do the same for other city unions. But contract negotiations with those unions have dragged on for nearly three years, and it's not entirely clear if Nutter will be able to get the same concessions from them.

It's possible that this move could help Nutter in the negotiations: It could put some public pressure on the non-uniformed unions. After all, if the hybrid pension plan is good enough for cops and nonunion workers, it might convince the public that it's good enough for everyone. Of course, the unions don't negotiate their contracts with the public, so public pressure only goes so far.

In any case, Nutter's move to change nonunion pension plans could be a sign that labor negotiations are about to heat up. Stay tuned.

Follow us on Twitter and review city services on our sister site, City Howl.

About this blog
Every year, city government spends slightly more than $4 billion. Where does all that money come from? More importantly, where does it go? Are we getting the most bang for our tax buck? “It's Our Money” is a joint project between Philadelphia Daily News and WHYY, funded by the William Penn Foundation, designed to answer these questions.

It's Our Money contributors

Tips? Comments? Questions?
Contact:

Holly Otterbein:
215-854-5809
hm.otterbein@gmail.com
@hollyotterbein

It's Our Money
Also on Philly.com
Stay Connected