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Cupertino City Employee Retirement Plan

Cupertino City employees may get a new retirement plan. Good article Matt.

Every citizen of Cupertino should read this article so they get a general idea of the retirement plan being agreed to by our City.

The article does not explain what a 2% at 60 retirement plan is, or the current 2.7% at 55 plan, or what assumptions have been made in drafting the plan. The article appears in this week's Courier, by Matt Wilson; Click Here to read article

I have not seen that old plan; but, my guess is as follows hypothetically.  A City employee who has been employed for say 30 years at age 55 and earning $100,000 their final year of employment receives 2.7% x 30 x $100,000 = $81,000 a year retirement. My guess is also that this retirement amount is adjusted in some fashion for inflation going forward post retirement. This is the old plan, IMHO, and I could be totally out to lunch here.

I am guessing that the new plan works somewhat like this, the article indicates an average of their last 3 years of employment compensation. Assuming the same hypothetical for new hires now the formula might be 2% x 30 x $100000 = $60,000 a year retirement. Of course anyone hired today and retires in 30 years from now will be earning much more than $100,000 annually adjusted for inflation.

Plans like this are based on assumptions of longevity, inflation and economic growth. 

If I have gotten this wrong; would someone please set me straight. I am not passing judgement; but, the article does not give much in the way of how this retirement plan works and how it fits into the concept of sustainability.

In the private sector agreements generally have what is known as a "Claw-back" clauses. This allows a business to go back and adjust for mistakes or bad assumptions, black swan events, or unanticipated changes. Does this retirement plan have a claw-back clause to adjust the plan if the underlying assumptions are incorrect and the plan turns out to be non-sustainable?  The article does not address this issue.

I am very appreciative of our City employees and the work they do. However; we have gotten ourselves into quite a pickle with non-sustainable entitlements and our representatives must make sure we do not replicate the same situation going forward.

The question is begged: how is this plan sustainable?

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Gary E. Jones November 25, 2012 at 06:36 PM
Letter to City Council, City Manager, and City Treasurer: "It would be nice if someone from the City explained, in more detail, how this adjusted plan is sustainable. What am I missing? How are the actuarial assumptions being made for the adjusted plan any different than the old plan? Did the City get an actuary to sign off on the underlying assumptions? How does this new plan compare to contemporary retirement plans being adopted in the private sector? For “transparency,” we, the public, need a lot more information than a new retirement age, change to % accrued annually and average of last 3 years. From the 30,000 mile view these appear to be slight tweaks to an existing plan. While I appreciate very much what the City employees do for our community; I believe as responsible citizens we should not kick the can down the road any further for the generation following our stewardship. Respectfully"
Gary E. Jones November 25, 2012 at 06:51 PM
City of Sunnyvale faced with unfunded City pension plan of $140 million over next 20 years? True or Flase http://www.gorillasites.com/sunnyvalepensionreform/
Gary E. Jones November 25, 2012 at 06:53 PM
http://sunnyvale.ca.gov/Portals/0/Sunnyvale/CouncilReports/2012/12-060.pdf
Gary E. Jones November 25, 2012 at 07:23 PM
“The long view of all this is a matter of our desire to maintain the highest level of transparency possible in our governance,” Sunnyvale communications officer John Pilger said. “But transparency efforts are based on the public not just hearing facts but really understanding the circumstances. Did the City of Cupertino hold a meeting like this and I missed it?
Mark Burns November 25, 2012 at 11:34 PM
Like so many things at the City level (Cupertino, Sunnyvale, Mountain View, etc., etc.), the staff does the bulk of the work on stuff like this. More transparency would mean public meetings to explain hard numbers and independent consultant's opinions (CPA-based, financial analysts and auditors) . I'm sure the staff is competent and professional but it looks like a conflict if they are crafting their own retirement plans. Especially if their philosophy is to follow what other cities are doing and that's their main argument.

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