How to Renegotiate Public Employee Pension Contracts

Municipalities sometimes renegotiate aspects of their pensions. Unlike the private sector, public pensions typically are defined benefit plans, meaning the employer is committed to a set ongoing pension payment to each of its retirees, regardless of the economic circumstances or performance of the retirement fund. People seeking reform of public pensions claim taxpayers should not be burdened with the costs of promised pensions that government cannot afford.

Instructions

1. Review the current memorandum of agreement and determine when the contract will expire, or if there is a re-opener provision for pension-related issues. If there is no re-opener, wait until the expiration of the contract before negotiating any changes.

2. Examine the terms and conditions of the pension plan. Decide what to change, such as the employer's contribution toward the employee share, the percentage of salary paid out, the vesting timelines, the lower age limits or the maximum cost of living allowance percentage for retirees.

3. Identify who the new terms and conditions will apply to. Some organizations may attempt to negotiate a change to current employees' contracts, while other employers set a date in the future, and the changes occur only to new hires from that point forward. Gather information on the cost savings and the proposed date for implementation as well as preparing any additional related information the union requests.

4. Negotiate with the union. Discuss the reasons for the change and the necessity of the action. Listen to the union's position, and continue to discuss the issue over multiple meetings as needed. Find out what the union is requesting in exchange for agreement and determine if you can reach an acceptable arrangement.

5. Sign the new contract if you have reached an agreement with the union. If not, declare impasse when negotiations are no longer productive. Work through the impasse and mediation procedures -- as applicable to your organization -- and make a good faith attempt to reach a mutual agreement. Once impasse procedures have been exhausted, unilaterally implement the new terms and return to the bargaining table upon request.

6. Work with the retirement association to implement the changes. Publicize the information to employees, answer questions, and change any hiring documentation that reflects the former pension arrangements.

Tips & Warnings

• Expect a lengthy process. This will be a topic that is critically important to the union's members, and the negotiations will likely require numerous sessions.

• Contact an experienced labor lawyer to assist with the process.

• Realize that employees will be angry and opposed to the change. Prepare for the possibility of potential work stoppage actions such as strikes or sick outs.

References

• State of California Department of Justice - Office of the Attorney General; The McCauley Public-Employee Pension Reform Act; November 2008
• Voice of Orange County; County Leaders Seek to Renegotiate Public Employee Pensions; Norberto Sanata Jr.; June 2010
• Knowledge at Wharton: Budget Blues - What Would State Bankruptcies Accomplish?; February 2011