PENSION REFORM: HOW IT IMPACTS PSEA/PUSD NEGOTIATIONS.

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PENSION REFORM: HOW IT IMPACTS PSEA/PUSD NEGOTIATIONS

What Pension Reform Does Changes retirement rules for new employees (hired on or after January 1, 2013)  Increased retirement age (from 55 to 67)  Must contribute half of the normal cost to fund their benefit (currently 7%, maximum of 8%)  3 year average to determine “final compensation” Changes take effect July 1, 2013 (when PSEA agreement expires)

What Pension Reform Does Does not require any changes to “legacy” employees (those hired before 1/1/13)  Creates goal that employees pay half of the normal cost to fund their benefit  Creates goal that employers no longer agree to pay the employee’s portion of their pension

What PUSD Currently Does PUSD currently pays employee portion of PERS contributions, in lieu of having provided employees with a 5% COLA  This is why the non-PERS salary schedule is 5% higher than the PERS salary schedule An OA II (Range 22) at Step 5 makes $16.58/hr ($2,874/mo ) A SpEd II (Range 22) at Step 5 makes $17.41/hr ($3,018/mo at 1.0 FTE)

What We Need to Decide For “legacy” employees, do we bargain to keep the status quo (District pays employee contribution)? Or do we agree to start making contributions of half the normal cost, in exchange for the getting the 5% wage increase (on top of any other wage increase we negotiate this year)?

How It Affects Take Home Pay Scenario I: Status Quo OA II, Step 5:$2,874/mo in salary  Pays 7.65% in Medicare/Soc. Sec taxes on $2,874 ($220/mo)  Nets$2,654 (before income taxes)  Pays federal/state income taxes on $2,874

How It Affects Take Home Pay Scenario II: 5% Increase OA II, Step 5: $3,018/mo in salary  Pays 7.65% in Medicare/Soc. Sec taxes on $3,018 ($231/mo)  Pays 7% of higher salary to PERS ($211/mo)  Nets $2,576 (before income taxes)  Pays federal/state income taxes on $2,806 (mo. salary of $3,018 minus 7% PERS contribution)

How It Affects Take Home Pay Side By Side OA II, Step 5Status QuoWith 5% Increase Social Security and Medicare Taxes (7.65%) Pays $220/mo (paid on $2,874/mo) Pays $231/mo (paid on $3,018/mo) PERS contributions from paycheck Pays $0/moPays $211/mo (7% of $3,018/mo) Net Income (after PERS and Social Security / Medicare) $2,654/mo (before income taxes) $2,576/mo (before income taxes) Taxable Income $2,874$2,806 ($3,018 minus 7% PERS)

How It Affects Retirement Side By Side OA II, Step 5Status QuoWith 5% Increase All OA II, Step 5 employeesNet Income: $2,654/moNet Income: $2,576/mo (-$78 than status quo) 55 years old w/ 20 years of pension credit Pension: $1,150/moPension: $1,207/mo (+57 than status quo) 55 years old w/ 25 years of pension credit Pension: $1,437/moPension: $1,509/mo (+$72 than status quo) 65 years old w/ 35 years of pension credit Pension: $2,012/moPension: $2,112/mo (+$100 than status quo)

What Should PSEA Propose? DISCUSSION