EID tackling pension reform with recent board vote

By: Staff report
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At its Feb. 25 meeting, the El Dorado Irrigation District (EID) Board of Directors approved a Letter of Understanding (LOU), amending EID’s labor contract with its Employee Association to authorize early implementation of Assembly Bill 340, the Public Employee Pension Reform Act (PEPRA).

In the fall of 2012, the legislature enacted PEPRA to reform various provisions of the Public Employees’ Retirement Law. Under the new law, employees are called upon to pay 50 percent of the “normal costs” of their pensions, up to a maximum of 8 percent of wages. PEPRA would not allow the District to impose this standard unilaterally until 2018. In response to PEPRA, however, the District and the Employee Association negotiated an agreement for early implementation in 2013, in two stages — a 2 percent shift from the District to employees in March and the remainder in November 2013. At that time, employees will fully meet PEPRA’s standard for employee pension contributions. Also, a third, lower tier of pension benefits (CalPERS 2.0 percent at age 62 retirement plan formula) will apply to all new employees hired on or after January 1, 2013. In 2010, the District implemented a second tier of pension benefits (CalPERS 2.0 percent at age 55 retirement plan formula), for employees hired on or after Jan. 1. Early implementation of PEPRA is expected to save the District approximately $3.1 million over the next five years.

The new agreement extends the union contract for three years, to Dec. 31, 2016. Consumer Price Index-based cost-of-living adjustments will range between 0 percent and 2 percent in each of the next three years. In 2016, health benefits cost-sharing obligations for employees’ and retirees’ dependents will increase from the current 90%–10% split for the benchmark plan to an 85 percent–15 percent split. There are also provisions for increased cost-sharing in 2014 and 2015, if benchmark premiums increase by more than 10% over the prior year. Those who choose an insurance plan more expensive than the benchmark plan will continue to pay the entire additional premium cost. Net payroll savings from the change in pension contributions during the three year contract extension period are approximately $500,000 and approximately another $325,000 in 2013 totaling net savings of $825,000 through Dec. 31, 2016.

“I am very pleased that the employees recognized the importance of implementing these pension reforms early. It will generate substantial savings for our District and its ratepayers — which include most of our employees,” said EID General Manager Jim Abercrombie. “We acknowledge the collaborative effort to reach this agreement, and I truly believe it fairly balances employee and ratepayer interests.”

The Board voted 4-1 to approve the amendments to the LOU. “I am surprised that the vote was not unanimous because of the significant savings realized for EID’s ratepayers,” said Board President George Osborne. “All Board members participated in several months of closed session meetings on this LOU, and the final product reflected all Board members’ priorities.”

“The employees recognize the fiscal strain the District has been under for the last few years. Most of us are ratepayers as well as employees and we feel the crunch of rising utility and living costs,” said Employee Association President Doug Venable. “The Association and management were able to reach an agreement that satisfies the priorities of budget reduction and long term stability. Although this contract is an overall loss for our employees, we voted overwhelmingly to ratify the new terms of the MOU. We want to thank management and the District Board of Directors for working with us through this process.”

~ Staff report