SAN RAFAEL – Future staff hired to work for the Sonoma Marin Area Rail Transit District are likely to receive a pension plan that agency staff said will be insulated from the pressures leading to unfunded liabilities in other public agencies.
Calling the plan “a revolutionary way of doing government business,” SMART General Manager Farhad Mansourian told the district’s board of directors during today’s regular meeting that the proposed retirement package would be most defined by a 50 percent contribution from employees, a move that would save the district approximately 1.1 percent of annual payroll for all new hires.
“Right now, we are small. Before you know it, we will be 100 people, maybe more,” said Mr. Mansourian.
The board unanimously adopted a resolution of intention to amend the CalPERS contract currently applying to SMART’s 18 employees, with a vote on whether or not to adopt the plan expected in May.
Applying to all hires after June 1, the plan includes details such as a 2 percent contribution per year of service with full eligibility at age 60, a cost of living adjustment capped at 2 percent and a capping of maximum benefits at 100 percent of average annual salary over the employee’s final three years.
With the contribution to the plan evenly split between SMART and employees, Mr. Mansourian said that the so-called “hybrid retirement system” that included defined benefits and contribution would split risks of losses to the pension fund over the years.
The plan, developed over nine months, would also require that SMART continue paying its employer contribution if the rate of return exceeded the need to do so, creation a cushion for periods during a negative rate of return.
“All of our future employees will be paying substantially more than any current employees and any other employees that we are aware of,” said Mr. Mansourian.
Current employees of SMART receive a 2 percent contribution as well, with full eligibility at age 55. SMART pays for employee contributions for employees hired before Sept. 1, 2011. The CalPERS plan would be expensive and difficult to exit for current employees, Mr. Mansourian said.
The new plan will be under a 401(a) or 457 structure, according to material presented to the SMART board.
Board members commended the plan for its cost savings, though Vice-Chair Judy Arnold expressed concern that the rate would make it more difficult for the district to attract top talent.
Mr. Mansourian said that the plan could in fact lead to more difficult hiring in the next seven to 10 years, but that other public agencies would be likely to adopt similar pension arrangements by that time.
“It’s a trade off,” said Ms. Arnold, who is also a Marin County supervisor. “In the future, it’s going to be business as usual. But we may have to have higher salaries to compensate so we can really get the best people.”
The board also approved the creation of several positions and their related salaries during the meeting, a vote that deleted two positions as well, and authorized staff to participate in hearings for a bill that would make more clear SMART’s exemption from building ordinances in local jurisdictions, known as Assembly Bill 1962.