The contract also eliminates the requirement in previous contracts that the town pay its police department employees based on a survey of local police agencies. The new contract says the town will continue to make the annual survey but will not have any obligation to pay employees at the 70th percentile of surveyed agencies.
"The Town is no longer governed by what other agencies do with respect to how we compensate our staff," City Manager Rodericks said in a report to the City Council.
The tentative agreement, which will come before the council at its regular meeting on Wednesday, Oct. 16, would save a significant amount of money for the town, Mr. Rodericks said.
The Atherton Police Officers Association represents 22 employees, five of them non-police officers. APOA President John Mattes said the association members unanimously approved the contract on Oct. 7, but that he did not want to comment further until the contract has been approved by the council.
In a press release posted on the town's website, Mr. Rodericks said that the agreement achieves the policy priorities set by the council.
Those priorities include eliminating the requirement that the town pay for retiree health-care costs for new hires; establishing a "cafeteria-style" health-care plan for current employees, who will share some of its costs; setting up a new pension tier with lesser retirement benefits for new hires; and having employees pay a share of their pension costs, which the town had previously paid.
The new contract also changes the way salaries are determined, and doesn't contain cost-of-living salary adjustments.
Mr. Rodericks' staff report for the Oct. 16 meeting says the town should save 7.6 percent on salaries and benefits with a combination of a 5 percent reduction in health insurance costs and money saved by having employees pay their share — 7 percent of their salaries — toward their pension costs over the contract period. A 5 percent salary increase over that same period is intended to partially offset that new employee expense.
Newly hired police officers will have their pensions figured at a rate that starts at 2.7 percent (times the number of years served) of their highest salary over a three-year period, with retirement eligibility at age 57. Previously, pensions were figured on a formula that gave 3 percent (times number of years served) of the highest one-year salary, with officers eligible to retire at age 50. New civilian police employees will receive 2 percent (times number of years served) of salary at age 62 instead of the previous 2 percent at age 55.
As always, employees who retire at an earlier age will receive a smaller pension, Mr. Rodericks said. Newly hired officers may retire beginning at age 50, but the percentage of pay (times years worked) drops to 2 percent. Civilian police employees can retire as early as 52, but the percentage drops to 1 percent.
Pensions for new employees will be capped at 120 percent of the compensation that would be subject to Social Security taxes at the time of retirement, now $132,120. (This is a formula, only. Police do not pay Social Security tax.) Annual increases in pensions based on the consumer price index (CPI) will be allowed.
Regarding the pension savings that will be realized under the new contract, Mr. Rodericks gave the following example:
The average sworn officer working for the town has 9 years of service and is 41 years old. With an existing mid-range $100,000 a year salary, if that officer retires at age 50 with 18 years of service to the town of Atherton, he or she would receive a pension of $4,500 per month, or $54,000 per year (3 percent of $100,000 times 18).
Officers hired under the new retirement plan would receive $3,000 per month, or $36,000 per year (2 percent of $100,000 times 18), if making $100,000 per year and retiring at 50 with 18 years of service.
Go to tinyurl.com/Report-109 to see the staff report.