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401(k) Backers Say Plan Could Save SD Billions

— The numbers show San Diego saving between $90 and $105 million in the first five years, and up to $2.1 billion after 27 years under the new retirement plan. The analysis was paid for by the group Comprehensive Pension Reform for San Diego, which is backing the ballot initiative.

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Supporting Documents

Supporting Documents

Analysis of the proposed Comprehensive Pension Reform measure released by The San Diego County Taxpayers Association.

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It would replace city pensions with 401(k) plans for all new employees, except police officers. San Diego Mayor Jerry Sanders and Councilmen Kevin Faulconer and Carl DeMaio are touting the plan as a way to permanently address rising city pension costs. The San Diego County Taxpayers Association is one of the leading advocates for the measure. Association President Lani Lutar said the measure would transfer the stock market risk for retirement plans from the city to the employee.

"Right now (with) what we have, the risk is all on the taxpayers. So we have these huge fluctuations (in the stock market) that are unpredictable. That negatively impacts the ability of the city to plan for the long term," she said.

The measure would also redefine how much of a current employee’s compensation can count toward a pension and would freeze base pay for San Diego city employees for five years.

"You might have heard of the 401(k) as the highlight of the measure, but it's much more than that,'' Lutar said

But opponents of the measure maintain San Diego has already taken pension-reform steps. Frank DeClercq heads the San Diego firefighters union. He said city unions have already made concessions in their most recent contracts that lower pension benefits for employees -- and those reforms need to be given time to work.

"They haven't even let those reforms take place, because, effectively, our new contract takes place tomorrow," he said. The city's fiscal year begins July 1.

DeClercq said this measure would lead to San Diego turning into a training ground for employees who will later leave for jobs with better benefits. Lutar said retention issues can be addressed by offering new employees better compensation packages when they are hired.

Lorena Gonzalez, the secretary-treasurer of the San Diego and Imperial Counties Labor Council, said the measure will remove a safety net for city workers. Also, she said freezing base pay for so long without bargaining with the unions is illegal because the five-year time period is so long.

"They're counting chicks that will never hatch under state law,'' Gonzalez said.

Lutar said the ballot language has been examined by lawyers and is on firm legal ground.

The city’s annual pension contribution is projected to keep climbing through fiscal year 2027 no matter which retirement system San Diego uses. It's also projected to drop substantially after that. However, the analysis from the backers of the 401(k) measure shows the payment dropping further under their plan.

City News Service contributed to this report

Comments

Avatar for user 'HarryStreet'

HarryStreet | June 30, 2011 at 5:59 p.m. ― 3 years, 9 months ago

I'm sure police, firefighters, and any and all government employees believe they have earned their right to pensions. But the truth of the matter is that most Americans do not have them because companies cannot afford them. The same goes with government. The taxpayer cannot afford to pay these pensions, which is why everyone should see the light at the end of the tunnel and invest in mutual funds and 401k, and Roth IRAs. Do the math. The taxpayers do not have the money to fund pensions. Don't wait until it's too late to realize this. If you can find a way to fund these pensions, bring it to the table.

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Avatar for user 'countyrn'

countyrn | July 1, 2011 at 2:34 p.m. ― 3 years, 9 months ago

Yes, let's do the math. Can we please see the math published that shows taxpayers what the City's pension obligations would be if the City had not under-funded the system, chose not to use the earnings (8% according to the Pension Reform Committee report 2004) to pay for future retirements coupled w/investment performance. Piss poor management was the cause of the current mess -not the fact the City has a defined pension plan, but because of of poor choices made by those in charge of managing the funds. And, most recent information published (June 2011) is contradicting the claim that a 401K plan will save the City money- on the contrary, will cost the City millions in the short term- "The colossal problem for the city is trying to pay off that $2.1 billion pension liability," Hovey said. "The 401(k) plan doesn't address that." Hovey is head of the San Diego City Employees' Retirement System. The tricky thing about doing the math-you need accurate data for the math to be correct.
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