UPEA has been monitoring potential changes to the retirement system. URS presented several options for consideration during a February 5, 2009 Legislative Independent Entities Appropriations Subcommittee Meeting (click here to hear audio).
URS’s legal council, Dan Anderson said, “URS isn't making any recommendations regarding changes, they are only bringing forth information as a place to begin discussions for making adjustments to the system, if desired by the committee.”
Some of the adjustments that could be considered are listed and explained below. Please keep in mind that none of these proposals are final. However, as public employees, we need to be educated on each of the alternatives so we can make a difference in the process.
Suspend/Lower Post Retired (“Double Dippers”) contribution to 401(k).
o Utah currently has a very generous post-retirement (“double dipping”) benefit policy. There is political momentum to change the benefit for the employees that “double dip” to save money. The concern is whether or not any changes can be legally made to the current employees using the post-retirement benefits.
Extend final Average Salary Period (for example from 3 years to 5 years).
o This proposal would allow the salary averages of the highest 5 years to be used in calculating your retirement benefit.
Make COLAs Discretionary/ Delay COLA.
o COLA’s on retirement disbursements could potentially be deferred until a specific anniversary date of retirement (for example 3 years after retiring) or until a retiree reaches a certain age (for example 65).
Increase the vesting period.
o Vesting periods for new employees could potentially increase (from 4 years to 6 years).
Put a minimum age condition on the 30 year benefit.
o One of the suggestions is to change the minimum age that an employee can retire without a penalty (55, 57, 60,etc…). The question is how would this apply to current employees? Would they be grandfathered?
Partial benefit payments until a certain age.
o This proposal would allow for an employee to receive partial retirement benefits until they reach a certain age (phased retirement).
Reduce the multiplier.
o Reducing the retirement multiplier (number of years x 2% x 3 highest average salaries) from 2% to 1.9%. The question is whether current employees would be grandfathered?
Increase 20 year public safety and firefighter requirement to 25 years.
o Would current employees be grandfathered?
Put a minimum age condition on the 20 year public safety and firefighter benefit (48, 50, 52, etc…).
o One of the suggestions is to change the minimum age that an employee can retire without penalty (48, 50, 52,etc…). Would current employees be grandfathered?
Change to the contributory system. Employees are currently on the non-contributory system.
o Such a move would allow employees to participate in funding their retirement benefit. Such a move would shift some of the risk to the individual.
Create a hybrid contributory/non-contributory system.
o This would allow the system to potentially have the employee participate in funding their retirement benefit, while still having part of their benefit be made up of the non-contributory system. (for example, employees might contribute 1% - 3% of their own salary to the pension).
Make the retirement benefit optional – employees can choose how they would like to participate at the time of hire.
Turn the defined benefit system (pension) into a defined contribution (401 (k)) system.
Basing your retirement eligibility by age + years of service.
o This proposal would say that you would need to follow the rule of 85 (or 90, 95, etc…). This would mean that you would need to have 30 years of service if you were to retire at the age of 55 (age + years of service = 85).
UPEA has been very busy this summer working on the retirement issues. The UPEA State Board recently created a taskforce that is discussing potential legislative action that may affect employee pensions and 401(k)s.
In addition, UPEA is spearheading a political training program this summer. This program will help public employees understand the political process, and empower public employees to institute positive change. The training will be conducted in a 3-part series that includes “Politics 101”, “Grassroots: How You Can Make A Difference”, and “How to Become A Delegate”. We will begin scheduling classes throughout the agencies this summer. If you would like to have UPEA come to a staff meeting, or come present at your worksite, please call 1-800-224-8732.