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City pension board backs amortization extension to fund benefit changes; council to consider ordinance
Summary
City staff and consultants recommended changes to the pension plan — vesting from 10 to 5 years, a 1% multiplier for years 31–40, and lowering employee contributions for later hires from 8% to 6% — to be financed by extending the unfunded‑liability amortization from 5 to 10 years; the pension board voted to support the change.
Deputy City Manager Pam Hodge and staff presented pension plan design recommendations July 14 that are included in the mayor’s FY2027 proposed budget. The proposals aim to improve benefits and reduce employee contribution burdens without increasing the city’s annual required contribution by changing the amortization schedule for the plan’s unfunded liability.
Key recommendations: change general government vesting from 10 to 5 years; add a 1% multiplier per year of service for employees with 30–40 years of service (allowing benefits to increase beyond the current 60% cap at 30 years); reduce the required employee contribution from 8% to 6% for employees hired after 07/01/2012; and remove the three‑year DROP suspension for new DROP participants. Hodge said actuarial analysis showed that extending the unfunded‑liability amortization from five years to 10 years would absorb the near‑term cost of these design changes and allow the city to implement them without increasing the city’s annual contribution.
Hodge explained the pension board reviewed the actuary’s model and, at its June 17 meeting, voted to change the amortization schedule from five to 10 years and indicated fiduciary support for the design changes if the amortization extension is adopted. Council discussion focused on the DROP suspension and the timing of benefit changes; Councilor Davis urged clearer definitions for catastrophic exceptions in DROP rules and suggested staff explore whether some employee relief (for example, the 8%→6% change) could be implemented earlier than Jan. 1, 2027 while staff coordinate plan documents and legal review.
Next steps: staff will prepare ordinances and plan amendments for council consideration, update administration systems, and notify employees; the proposed effective date in the presentation was Jan. 1, 2027.
