2013 Santa Clara
County Leadership
Academy
Margarita Balagso
Julie Behzad
Joe Chavez
Karen Levy
Melissa Maglio
Judy Saunders
Melissa Tronquet
Recruitment
and Retention
of Public
Employees
After PEPRA
The Challenge

PEPRA (CA 2013) created lower tier benefits for
employees new to CalPERS

QUESTION: Will this create recruiting & retention
problems for the public sector?

If so, how can we mitigate this problem?
Public Employees’ Pension
Reform Act (PEPRA)

Effective January 1, 2013

Lower retirement formula/higher retirement age
for new employees

Cap on pensionable salary for new employees
(currently $135,000 vs. $225,000 for classic
employees)

“New” employees are those with no prior CalPERS
service or those with a break in service 6+ months
Research Methodology
 Reviewed
provisions of PEPRA
 Interviewed
Washington & Oregon about
their pension reform:
1.
Counties
2.
Cities
3.
Both States
 Researched
similar studies
 Interviewed
benefit expert
Pension Reform in Other States


OREGON
1.
Pre-1996 hires: 1.67% @ age 58
2.
Hired 1996-2003: 1.5%@ 60
3.
Hired after 2003: defined benefit (1.5% @ 65) &
defined contribution (6% salary)
WASHINGTON
1.
TIER 1: phasing out
2.
TIER 2: 2% @ 65
3.
TIER 3: 1% @ 65 + defined contribution plan with
employee contribution (5-15% salary, based on age
& employee choice)
Washington State’s Experience

King & Pierce Counties & State

No impacts to recruitment or
retention

Pension “It is what it is.”
Oregon’s Experience
 Clackamas
County, cities of Hillsboro,
Albany & Salem & State
 No
clear impacts to recruitment or
retention
 Some
agencies use incentives to attract
highly qualified candidates
 Hard
to compete for some jobs
due to inflexibility
California Experience

Too soon to tell

Current employees less likely to move to agency
that adopted a second tier prior to PEPRA

Cupertino & Saratoga adopted 2nd tier (2% @
60) prior to PEPRA said this hindered
recruitment of qualified candidates

Morgan Hill (no 2nd tier) had 3
candidates choose them over agencies
with 2nd tiers
Do CA Employees Care?

2011 National University Masters project survey

47.8%: 2nd tier would have significant impact on decision to
change employers

42.9%: 2nd tier would have some impact on promotion decision

More experienced employees more likely to give significant
consideration to pension formula

Employees who are not happy in current jobs
less likely to care about a less generous
retirement package
Findings
 Little
impact on employees new to CalPERS
 Greatest
impact on current employees
moving to agencies with existing 3-tier
system
 Difficulties
in hiring from private sector
involve other factors
Recommendations

Track recruitment & retention for affects of
PEPRA

Offer 401(a) deferred compensation plan to
supplement lower defined benefit pension
formulas

Change culture to make public sector
workplaces more modern & flexible

“Sell” public service as recruitment tool
401(a) Plans
 Solution
if needed to offset affect
of reduced pensions
 Allow
employer & pre-tax contributions for
employees
 Higher
cap than 457 plans; may be
implemented in addition to 457 plans
 Significant
plan
flexibility in structuring a 401(a)
Changes in the Workplace

Public sector work is interesting, rewarding &
satisfying!

Serving the community is important; leverage
this to attract smart, dynamic people:
ASSIGNMENTS: rotational, interdepartmental, diverse
&/or high impact
EMPLOYEE: Interested; avoids being in a ‘rut’
EMPLOYER: Builds skills & develops internal talent
Keeping Good Employees


Options:

Part time work or job sharing

Flexible schedule

Telecommuting for appropriate positions
More diverse range of benefits that better
align with different generations
EXAMPLE:
salary,
retiree health/pension
benefits more attractive to younger employees
Summary

WA & OR report pension reform may not have
substantial impact

Monitor California for potential future
problems

Change culture/working conditions

Promote benefits of public service

Solution: 401(a) plan tailored to mitigate
specific needs & concerns