Phoenix Voters Could Decide on Replacing Employee Pension With 401(k)-Type Plan

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Azwatchdog via Wikimedia Commons


Phoenix voters will likely be voting on reforms of the pension system for city employees, which includes actually phasing out the program, and replacing it with a 401(k)-style plan.

A right-wing group called the Arizona Free Enterprise Club started its effort to collect signatures to put this on the ballot in January, and announced yesterday that it had more than 54,000 signatures. Only 25,480 verified signatures are needed to put the issue on the ballot.

The measure, if it's eventually approved by voters, would replace the pension system with the 401(k) plan for new employees. It would also allow current employees switch over from the pension to the 401(k) plan.

There's a major difference between the two. The workers pay in to both systems, but in the pension, the benefits are defined -- a formula based on an employee's length of service, salary, and age decides their pension payouts. In a 401(k) system, there's no guarantee of what the payout will be, as it all depends on how the investment of the contributions work out, thus passing on the risk to the employee, unlike the pension system.

In addition to that, the measure would change the rules about so-called "pension spiking." Right now, if a city employee doesn't use up his or her unused sick time or vacation days, those days can essentially be cashed out when an employee retires.

The pension spiking became a more well-known issue once former City Manager David Cavazos, who had the highest salary in the city, retired with well over six figures' worth of unused sick time and vacation days.

Since the city manager's post is where this can have the most impact on the city's bottom line, Mayor Greg Stanton said the new city manager would not have a contract that allowed such a manuever. Longtime city employee Ed Zuercher, who was selected as the new city manager, indicated he was fine with that.

Recall that just last year, Phoenix voters approved Propositions 201 and 202, which dealt with reforms to the pension program. The city-proposed changes were billed as a way for the city to save nearly $600 million over 23 years.

After Cavazos' retirement later last year, Mayor Stanton set up a subcommittee on "pension fairness and spiking elimination." They say their proposal will save $233 million over the next quarter-century.

None of this is satisfactory to the group that gathered signatures to but its own style of pension reform on the ballot.

"The outpouring of support from Phoenix residents wanting real pension reform has been tremendous," Scot Mussi, executive director of the Arizona Free Enterprise Club, says in a statement. "The power brokers at City Hall have refused to fix our broken pension system, instead passing sham reforms thinking they can hide the problem from taxpayers. Voters are fed up with the games and deserve an opportunity to decide the issue for themselves."

It's worth noting that neither the city reforms nor the ones proposed by the Arizona Free Enterprise Club affect cops or firefighters. They have their own pension system statewide called the Public Safety Employees' Retirement System.

Click here to read the text of the Arizona Free Enterprise Club's "Phoenix Pension Reform Act."

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Follow Matthew Hendley on Twitter at @MatthewHendley.




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32 comments
Bhang Bhang
Bhang Bhang

Yes, even the playing field and reduce the luster of going to work for the system

Michelle_Flan
Michelle_Flan

So people that run into burning buildings, get shot at, and who we call when WE need help, don't deserve a defined benefit plan?

Anyone that needs to wear a bullet proof vest should be able to know what their retirement benefits would be if they died or were severely injured.

Daniel Riley
Daniel Riley

"...they are all stupid sheeple..." Says the hippy in the tie-dye t-shirt. But in all seriousness, you often hear this sentiment that the government can't do anything right, that civil servants are lazy, etc. In a nation of 317 million, can you find anecdotal evidence to support that assertion? Sure. But in a nation that size, you can just as easily find anecdotal evidence of just about anything. Let me walk you through some of the things local, state, and federal employee thanklessly do for you folks who always complain about how much government sucks: 1. Air Traffic Controllers safely direct over 30,000 aircraft per day in U.S. airspace. 2. The Postal Service delivers nearly half a million pieces of mail every day. 3. Phoenix Fire Department covers an area greater than 2,000 square miles and responds to almost a half million calls per year. 4. Local teachers educate the more than 1 million pupils enrolled in K-12 programs in the State. Civil servants are also responsible for inspecting, building, and maintaining roads, bridges, and infrastructure; administering aid programs; protecting children from abuse and neglect; managing water, electricity, and other resources; operating libraries, parks, trails, and other public facilities; protecting the integrity of food supplies; managing wild land, forests, and other natural resources; and of course, providing for the national defense. Those are just a very small fraction of the things those "sheeple" do for thankless ingrates like you.

Tracy Guest
Tracy Guest

Yes. The forced pension contributions make no sense.

Steve Smith
Steve Smith

there are NO high-quality employees in government, they are all stupid sheeple!

Mark Weld
Mark Weld

"economic downturns"!?? Try almost complete annihilation of our economy in 2008 and in the late 20's BOTH due to the GOP favoring deregulation of RULES and LAWS that protected us from such a thing happening. YOU might wanna study actually what happen and why in BOTH instances BEFORE you comment again...

Marty Ercoline
Marty Ercoline

Does it really matter? Our financial system is what it is and whether they have a 401K or a pension, their retirement plans are up to the INDIVIDUAL!!! NOT THE STATE OR CITY.

Marty Ercoline
Marty Ercoline

you really have no proof of that....and if you really did, you would realize that Congress and the Feds have nothing to do with economic downturns....

Marty Ercoline
Marty Ercoline

seriously. What proof do you have that shows Government agencies attract the brightest workers? People go to work for local Govt's because the work is easy peasy....local to home.....they feel entitled.....no real pressure to improve.......time stands still most of the time.....

Doug Hughes
Doug Hughes

Problem is that existing employees (and the employer) pay into the plan, and that helps fund it for retirees. If current employees no longer pay into it, it will require the employer (us tax payers) to make up the difference, thereby making the problem worse.

Captdie Steve O
Captdie Steve O

LMAO. Like if you're 401K got nearly wiped out back in 2008.

Tom Armistead
Tom Armistead

Keep the pension plan....Add a voluntary 401-K......Works great for the city of Tallahassee in Florida.....

Michael Swann
Michael Swann

let the gubment workers suffer like the rest of us dammit

P.j. Dean
P.j. Dean

Switching to a 401k plan will cost taxpayers more than just fixing the existing pensions.

Daniel Riley
Daniel Riley

People enter public service knowing they're going to be paid less than they would earn in the private sector, because the public sector offers better benefits - including health benefits, a pension, better medical leave, etc. They're not going to be able to continue to attract high-quality employees if the major selling point of civil service - a guaranteed pension - is taken off the table.

Mark Weld
Mark Weld

and the next time the GOP is in control it'll get wiped out in the stock market like the LAST two financial collapses in US history.

james8394
james8394

People like the Az free enterprise club seem to believe that all economic problems can be solved on the backs of folks making $45,000 a year, IF they are in a union. Poor tax policy and bad management will always get a pass with their kind. It's always "those greedy unions." People take public service type jobs and receive lower wages than they would in the private sector in exchange for job security, job rights and benefits. Ending benefits will simply mean the city will have to pay higher wages to attract decent workers. There will be no savings to taxpayers. 



This is another one of those "solutions in search of a problem" brought to you by people with no skin in the game. If they have any interest at all it's probably to redirect money to themselves.    

fishingblues
fishingblues topcommenter

@Michelle_Flan  How about people that walk steel beams 30 stories in the air?  How about framers that walk 3 1/2" plates while framing your house?

There are any number of dangerous jobs.  People perform those tasks for a variety of reasons.   Government  pension plans are bankrupting cities.  Retirement plans should be brought into line with the private sector.  You know, those same people who fund the pension plans.     

fishingblues
fishingblues topcommenter

Who are you trying to fool Danny Boy?  Only government workers attempt to defend government workers, everyone else has to deal with them.

frankpiccioli
frankpiccioli

Please. Mention that the next time you you'll 911

frankpiccioli
frankpiccioli

Your wrong. Phx pension system is very very strong and not bankrupting anyone. Read the facts. Switching to a 401k will cost millions. Don't be a sheep. Learn the facts.

frankpiccioli
frankpiccioli

Yes. You have to deal with firefighters... 911 operators... Fire inspectors... All people trying to keep you safe. How terrible

fishingblues
fishingblues topcommenter

@frankpiccioli  "your (sic) wrong."  Really.  My statement was that "government pension plans are bankrupting cities" not specifically Phoenix.  


When you say "read the facts", do you mean YOUR facts?  

frankpiccioli
frankpiccioli

And you are no doubt a right wing tea party zealot who who demonizes the people who risk their lives for you.

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