SJ Police and Fire Reach Measure B Agreement; Door Opens For Federated Talks

What seemed impossible not long ago has become reality as the leaders of the Police Officers Association and the Firefighters Union have reached a Tentative Agreement to settle litigation over San Jose's failed pension Measure B. The TA was authorized by the City Council and both Union's Board of Directors, and resolves the litigation over pension, retiree healthcare, and disability benefits. Months of talks led to the settlement.  This is a significant breakthrough that could have positive implications for Local 21's San Jose Members if a similar framework brings federated employees to a settlement as well.

Details of the new agreement are below.  The new framework eliminates Measure B and replaces it with a legal, competitive and affordable pension and retiree healthcare benefit and it is a tremendous turnaround from the illegal and Draconian provisions of Measure B.

Local 21 Executive Vice President and AEA President John Mukhar said this morning in response to the news, “The Police and Fire framework provides Local 21 and the other federated unions a window of opportunity to reach an agreement that ends the nightmare of Measure B. We look forward to moving swiftly to capitalize on this opportunity for our Members.”

Local 21 will begin Internal and external discussions next week to explore how the new agreement the Police Officers Association and Firefighters Local 230 reached to void Measure B can be equitably applied to settle litigation brought by federated unions, including Local 21.  

Below is the message that went to Police and Fire Members.  Click here to see the settlement TA.

Summary of Settlement Framework

What is it?

Attached is a 16-page document that lays out the key points of agreement between the POA, Local 230 and the City.  It was tentatively approved by the City Council in closed session, yesterday.  The SJPOA Board of Directors tentatively approved it this afternoon.  Local 230's Board of Directors has approved it already.  It will be formally submitted to the City Council in Open Session on August 4, 2015. The overall deal in contingent on a POA wage agreement. There will be a special POA membership meeting called in the near future to go over this framework in more detail.

What are the key points?

  • It INVALIDATES Measure B, striking it from the Charter and ending litigation.
  • It creates a COMPETITIVE, VESTED Tier 2 benefit, maximizing at 80% after 30 years (Average of 2.66% year at 57 years old) with a COLA capped at 2%.
  • It RESTORES Tier 1 and Tier 2 disability benefits to the standards that existed prior to Measure B
  • It PROTECTS Retiree Healthcare and reduces its cost from 9.5% (and the inevitable escalation to 12.4%) to 8% and installs a floor for retiree medical benefits that cannot be lowered

a.     Tier 1 employees will have a one-time opportunity to opt-out of the City's retiree healthcare benefit and opt-in to the VEBA with their contribution rate dropping to 5% and their previous contributions made for retiree healthcare placed into their individual VEBA accounts 

b.     Tier 2 employees will have a new, portable defined contribution retiree healthcare benefit (VEBA) which they will control and fund at 4%

  • Lateral officers (including former San Jose Officers) who qualify as "classic employees" under state law (i.e., they were a cop before 1/1/13) may join or rejoin SJPD as Tier 1 officers (this includes former San Jose Tier 1's who have returned as Tier 2)
  • Retirement benefits will be protected in a Tripartite (meaning with Local 230) 10-year Retirement MOA (i.e., until 2025)

What happens next?

The agreement contemplates a number of steps:

  • Approval by POA and Local 230 
  • Formal approval by the City Council (August 4, 2015)
  • The Federated Unions resolving their litigation with the City
  • The City and POA must agree on a wage deal.
  • The invalidation of the Measure B by a judge through the quo warranto action (which the City will not oppose).
  • The drafting of new ordinances and a Tripartite Retirement MOA between POA, Local 230 and the City to replace Measure B with the provisions in the Settlement Framework.
  • If the other unions do not reach an agreement to resolve their litigation, or if the quo warranto process does not succeed in invalidating Measure B, the terms of the Settlement Framework would be reduced to a ballot measure and presented to the San Jose voters for approval in November 2016.
  • If the measure is not approved, then the litigation would resume.

More Details on the Key Elements

New, Vested Tier 2 Defined Benefit Plan

The Tier 2 pension plan will be improved to more closely match the CalPERS public safety Tier 2 plan ("PEPRA").


All current Tier 2 employees are upgraded to the new Tier 2, and will pay 50% of the cost of upgrading.

  • Tier 1 members who leave and return will come back as Tier 1 members, including those who have already returned as Tier 2. People who lateral to San Jose from a "classic" CalPERS plan come in as a Tier 1 member, while those in a PEPRA plan will come in as Tier 2.

DISABILITY (for Tier 1 and Tier 2)

  • The Measure B definition of disability ("incapable of engaging in any gainful employment") is eliminated. The pre-Measure B definition of disability is restored.
  • New timelines are applied to the disability retirement process, including filing for disability retirement within one month of separation, submitting substantiating medical paperwork within one year, and submitted your final case within four years.
  • Disabilities will be heard by a panel of three medical experts chosen by the retirement board, and the panel's ruling can be appealed to an Administrative Law Judge.
  • For Tier 1 members, the "workers compensation offset" of Measure B is eliminated. For Tier 2 members, only the first $10,000 of a workers' compensation award will offset your retirement pension under certain conditions with certain reductions.

RETIREMENT HEALTHCARE

Tier 2

  • Tier 2 employees will be placed in a defined contribution retirement healthcare savings fund ("a VEBA")
  • Members contribute 4.0% of base pay to that fund (and no longer have to pay 9.5%). 
  • Member directs investment; benefit is portable; it has survivorship provisions. 
  • A Catastrophic Disability Healthcare Program provides support in the case of a service-connected disability retirement.

Tier 1:

  • Contribution rate will go from 9.5% to 8%, instead of rising to 12.4% to fully fund the benefit, as Measure B required.  One caveat: Of the 8%, 5% will continue to be pre-tax while 3% will become a taxable benefit.
  • A new low-cost plan for retirees is provided but we have created a floor to prevent the level of the benefit received being reduced again as happened multiple times in recent years. (This does not affect active employee healthcare.)
  • Once retired, retirees can choose a healthcare "in lieu" option for any year in which they do not need healthcare coverage.

Tier 1 Opt-In

  • Tier 1 members will have a one-time opportunity to opt-in to the VEBA.  If the member chooses to do so, he/she will leave the current defined benefit plan and go over to the defined contribution plan. 
  • The contribution rate for Tier 1 opt-ins is 5.0% of base pay. 
  • You will also receive a credit for whatever you have previously paid into the defined benefit plan. 
  • The Catastrophic Disability Healthcare Program will assist with retiree healthcare costs in the event of a service-connected disability retirement.

SUPPLEMENTAL RETIREE BENEFIT RESERVE (SRBR)

The illegal elimination of the SRBR is undone. Instead, all SRBR assets will still remain in the pension plan and a new benefit, called the Guaranteed Purchasing Power provision, will replace the SRBR. The GPP is designed to ensure that - after retirement - your pension benefit and its COLA will always provide you with at least 75% of the purchasing power that it had when you retired.

LEGAL FEES

The City has agreed to pay the SJPOA and SJFF a total of $1.5 million in legal fees within 30 days after they approve this framework in open session. The Unions will have the right to pursue additional legal fees, including those that may be necessary to implement the Settlement Framework through the courts, through a binding arbitration process which the City will pay for.