CA: SMART Rail Board Poised to Adopt Modest Pension Program for New Workers

April 19—The Sonoma-Marin Area Rail Transit board gave preliminary approval Wednesday to a two-tiered pension plan that rail officials said will save millions of dollars in personnel costs in the coming years.

The agency is ramping up to build the first phase of its San Rafael-to-Santa Rosa rail line — with a planned opening in late 2015 or early 2016 — and expects to hire as many as 100 new employees during the course of the next two years to support that work.

Those new employees are likely to see a different pension plan than enjoyed by the 18 people employed by SMART now.

The new pension tier for workers hired after June 1 will see the age for full pension eligibility rise from 55 to 60 years old. The new employees will also split the cost of benefits equally with the agency. Often it is the agency that picks up full costs. Also under the new plan, cost-of-living adjustments — which can go as high as 5 percent — will be capped at 2 percent.

"It's a revolutionary way of doing government business," said SMART general manager Farhad Mansourian, of the two-tiered system. "We are in a position where we are hiring going forward and by law we are allowed to develop these pensions."

Pensions for public employees have drawn fire in recent years. Cities, towns and special districts are facing steep costs to cover pensions promised to workers and retirees. Costs are rising faster than the revenue needed to pay for those

obligations and pension reform is being discussed widely.

Agencies that are more established have difficulty changing decades of pension rules to bring costs down, but SMART — as a relatively new agency — doesn't have the same limitations.

"We are in an enviable position to build this at this stage," said Novato Councilman Eric Lucan, a SMART board member.

Because the new employees have yet to be hired and salaries are not know, the agency does not have a firm handle on annual savings it will glean with the second pension tier. Mansourian expected savings of "hundreds of thousands" of dollars each year and "millions" over time. The agency does expect a 1.1 percent annual savings on new salaries.

"All of our future employees will be paying substantially more than our current employees," Mansourian said.

The pension for new employees will be 2 percent of salary for each year of service with full eligibility at age 60. The agency also had the option of paying nothing, or 3 percent at age 60, 2.7 percent at 55, 2.5 percent at 55, or 2 percent at 55. Also, a 2 percent match of an employee's contribution into a deferred 401(a) plan will be offered.

Maximum benefits are capped at 100 percent based on an average of three years of normal salary. No "spiking" is allowed by adding vacation, sick and other pay into that salary total.

"What is important is that we are combing defined benefits with defined contributions," Mansourian said. "This is the stingiest and most cost-effective that we can get."

While the plan will bring savings, it could come at some cost. Mansourian acknowledged the new tier -- expected to get final board approval in May — could prompt the best job applicants to look elsewhere for work. Engineers in particular, who are in high demand, could shy away from SMART.

"That is part of the difficulty," he said. "And in some cases we may have to adjust the salaries."

Marin Supervisor Judy Arnold, a SMART board member, agreed.

"We might have to have higher salaries to get the best people," she said.

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Copyright 2012 - The Marin Independent Journal, Novato, Calif.