Pension Reforms? Federal Government Needs to Certify Its Cut, San Jose Still Waiting

natural disaster?vox efx/foter.comLast June, voters in San Jose approved, by a margin of more than two to one, a set of pension reforms affecting benefits for current and future municipal employees. It was a bid to control costs (retirement benefits consume up to 20 percent of the annual city budget) that could threaten the city with bankruptcy. Of course, the unions involved got ready to sue immediately.

But the efforts in San Jose (and elsewhere in California) are also being thwarted by the IRS, as the Mercury News reports:

But a key part of the plan was that the city would also offer its workers an alternative to the higher pension deductions with the choice of a reduced pension benefit for their remaining years on the job. The Internal Revenue Service must certify that this reduced "opt-in" plan meets its requirements for allowing pretax retirement deductions. But more than a year after San Jose voters overwhelmingly passed the pension reforms, the IRS has yet to OK the opt-in plan.

San Jose isn't the only city or county with such a request. Orange County has been waiting five-plus years for an answer. Mayor Chuck Reed, who championed Measure B, has made repeated trips to Washington, D.C., to lobby for IRS approval, and has rallied officials in other cities and counties facing similar issues to join in support. Back east last week visiting family during the council summer break, he said he was "cautiously optimistic" that the IRS will act by the end of the year.

Paul Krugman argues underfunded municipal liabilities don’t matter because the national GDP is big (no, seriously), yet even when municipalities are trying to resolve their fiscal crises, the federal government’s cut is something that needs its own approval, based on a 2006 rule. The unions argue San Jose’s measure breached their workers’ “vested rights.” The need for IRS approval suggests the feds see their own vested rights as San Jose tries to fix its fiscal house as well.

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  • Fist of Etiquette||

    But more than a year after San Jose voters overwhelmingly passed the pension reforms, the IRS has yet to OK the opt-in plan.

    They should have worked the words tea and party into the reform plans. The IRS would have jumped right on checking that out.

  • Swiss Servator - past LTC(ret)||

    I implicitly trust the IRS to be fair, impartial and above board on this!

    If you need me, I will be weeding my pumpkin patch, so this year The Great Pumpkin will come and visit me!

  • tarran||

    This would be a fucking big deal.

    When a pension collapses, it generally destroys the retirement of the pensioner (even if he has significant assets for retirement, they've been invested with an eye to minimizing life-time taxes assuming the existence of the pension).

    In trying to hinder employees' options to craft an alternate path to retirement, the IRS is crossing a bunch of lines. It's shit like this that will get the apolitical to participate in a tax-rebellion.

  • Hugh Akston||

    Krugman-bashing: Too much is never enough!

  • Pro Libertate||

    Do you know the way to San Jose
    I've been away so long
    I may go wrong and lose my way
    Do you know the way to San Jose
    I'm goin' back to find
    Some peace of mind in San Jose

    LA is a great big freeway
    Put a hundred down and buy a car
    In a week, maybe two, they'll make you a star
    Weeks turn into years, how quick they pass
    And all the stars that never were
    Are parkin' cars and pumpin' gas

    You can really breathe in San Jose
    They've got a lot of space
    There'll be a place where I can stay
    I was born and raised in San Jose
    I'm goin' back to find
    Some peace of mind in San Jose

    Fame and fortune is a magnet
    It can pull you far away from home
    With a dream in your heart you're never alone
    Dreams turn into dust and blow away
    And there you are without a friend
    You pack your car and ride away

    I've got lots of friends in San Jose
    Do you know the way to San Jose

    Oh, LA is a great big freeway
    Put a hundred down and buy a car
    In a week, maybe two, they'll make you a star
    Weeks turn into years, how quick they pass
    And all the stars that never were
    Are parkin' cars and pumpin' gas

    I've got lots of friends in San Jose, oh...oh...
    Do you know the way to San Jose, mmm...mmm...
    Can't wait to get back to San Jose

  • The Late P Brooks||

    Has the NLRB weighed in on this?

    I hear they are nonpartisan and evenhanded.

  • anon||

    Brooksie, you've stumbled upon something hilarious.

    You can replace NLRB with pretty much any agency and it's equally funny.

  • OldMexican||

    Paul Krugman argues underfunded municipal liabilities don’t matter because the national GDP is big (no, seriously)


    According to Krugman, GDP is fungible.

    Somebody bring the giant Indian; we need a pillow here...

  • PRX||

    simple solution: stop offering pensions.

  • The Late P Brooks||

    simple solution: stop offering pensions.

    No kidding. All compensation in cash, up front. Pay your own doctor bills/ insurance. Save your money, and invest for your retirement.

  • sangdi||

    a set of pension reforms affecting benefits for current and future municipal employees. Could have been sustained attention!
    tobacco pipes
    www.tobaccopipesshop.com

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