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AGENDA ITEM : (lu ?l \-C (o!M.">'+-i) <br />FREQUENTLY ASKED QUESTIONS RECEIVED FROM : <br />ABOUT THE SANITATION DISTRICTS' CONTRACT 1::-J~ot~t~~otn~p~f~t~~O:::.-:F::-::~~J-=-~~E~~==-R~D-:-:AT~T~H--E <br />Shouldn't the employees be contributing to CaiPERS? <br />COUNC IL MEETING OF : ?{t.l I '1 <br />OFFICE OF THE CITY CLERK <br />Yes, that's why employees always have and will continue to make their contribution . "Class ic" <br />employees (hired prior to January 1, 2013 when the PEPRA law went into effect) DO contribute a fixed <br />7% to CaiPERS. Prior to 1982, this contribution had been post -tax directly out of the employees' <br />paychecks. At Management's suggestion and in lieu of an 8.5% COLA in 1982 (there was very h igh <br />inflation at this time), this "employee contribution " was converted to pre-tax "Employer Paid Member <br />Contribution", or EPMC, so that the employees' paycheck reflected a 7% increase i n take home pay to <br />make up for not receiving the full COLA for that year . At that time and ever since , Management had <br />assured the employees that this was indeed their money and their personal contribution to CaiPERS . <br />The employees' CaiPERS statements reflect this, the Districts' Salary Schedule reflects th is, as does every <br />other related document in the nearly 4 decades since this initial swap occurred. The EPMC is the <br />employees' retirement contribution, not the agency 's. <br />"PEPRA" employees (those hired after January 1, 2013), pay an annually calculated rate to CaiPERS <br />based on 50% of the normal cost of benefits, which is currently 5 .75%. As of July 1, 2017 , the Districts <br />stopped paying the 7% EPMC for these employees and began deducting 5 .75% from their paychecks. <br />This rate is expected to go up to 6.75% this coming fiscal year. From January 1, 2013 to July 1, 2017 , <br />PEPRA employees paid the same 7% contribution to CaiPERS through the EPMC as did the classic <br />employees. <br />What has been the main contract dispute? <br />The main issue of disagreement had been Management's "soft landing" proposal-which required <br />employees to make progressively increasing contributions towards their pension (and thereby cutting <br />the EPMC) AND lose cost of living allowances in the same amounts. This effectively made classic <br />employees pay for their CaiPERS contribution a SECOND time; the first time being when the employees <br />gave up the 8.5% CO LA in 1982. The EPMC is , in effect, vested compensation and the AFSCME u nits <br />proposed that the 1982 deal be reversed in its entirety, i n what is known as a "full-swap ": the 7% EPMC <br />would no longer be paid directly to CaiPERS by the Districts , but the 7% CaiPERS contribution would <br />instead come right out of the emp loyees' paychecks, with 7% of the withheld 1982 COLA being returned <br />to the employees as a salary increase . Financially, this would be equivalent to "status quo" and not <br />significantly increase costs to the Districts. <br />Wouldn't it only be a half percent that the employees would pay under the Management plan? <br />No. That is a half percent for the first year, going up by a half percent each subsequent year, for a <br />cumulative annual take-back of 2 .5% out of both the employees' salaries and pensions by the end of the <br />proposed contract term. None of the affected employees believe that this would stop with the 2.5%, <br />and that the entire 7% would eventually be taken. Employees in five bargaining units un i onized under <br />the American Federation of State , County and Municipal Employees (AFSCME) in early 2017 specifical ly <br />to protect their CaiPERS contribution and resist this thinly veiled pay/pension cut, with t wo other un its <br />following suit at the end of 2018. When the effects of the so-called "soft landing" were calc ul ated out <br />over the course of individual employees' future earnings, a cumulative loss of upwards of a hundred <br />thousand dollars or more, per employee, were discovered.