Retiree Supplemental Cost of Living Adjustment; Retirement Board Contract with Executive Director

Shall the City amend the Charter to allow City employees who retired before November 6, 1996, to receive a supplemental cost of living adjustment to their pensions even if the retirement system is not fully funded and allow the Retirement Board to have an individual employment contract with its executive director?

Digest by the Ballot Simplification Committee

The Way It Is Now: The City provides its employees with pension benefits through the San Francisco Employees’ Retirement System (SFERS). In the November 6, 1996, election, the voters approved a supplemental cost of living adjustment (COLA) for retirees. City employees who retired before November 6, 1996, are eligible for this supplemental COLA if the SFERS investments meet their expected rate of return and can pay for all the accrued pension benefits owed to City retirees and employees (fully funded).

The City’s Retirement Board (Board) oversees the SFERS and appoints and removes its executive director. When hiring an executive director, the Board may not enter into an individual employment contract. Instead, the Board must follow City civil service hiring rules, which limit the salary and benefits the Board can offer.

The Proposal: Proposition A would make City employees who retired before November 6, 1996, eligible for a supplemental COLA, even if SFERS is not fully funded. In years when SFERS is not fully funded, the supplemental COLA would be limited to $200 per month for retirees who have an annual City pension of more than $50,000.

Proposition A would also allow the Board to enter into an individual employment contract with any executive director hired on or after January 1, 2023, without regard to City civil service salary, benefits and other limits.

A "YES" Vote Means: If you vote "yes," you want to allow City employees who retired before November 6, 1996, to receive a supplemental cost of living adjustment to their pensions even if the retirement system is not fully funded and allow the Retirement Board to have an individual employment contract with its executive director.

A "NO" Vote Means: If you vote "no," you do not want to make these changes.

Controller's Statement on "A"

City Controller Ben Rosenfield has issued the following statement on the fiscal impact of Proposition A:

Should the proposed Charter amendment be approved by the voters, in my opinion, it would have a significant impact on the cost of government. Based on the Retirement System’s current actuarial assumptions and policies, the measure would result in expected costs to the City of approximately $8 million annually for ten years, of which $5 million would be paid from the General Fund.

The current Charter dictates that a portion of the cost of living adjustment (COLA) paid to members of the San Francisco Employee Retirement System (SFERS) that retired before November 1996 are paid only when certain conditions are met and the pension system is fully funded. The proposed Charter amendment would eliminate the full-funding requirement for these members and their qualified survivors and beneficiaries in future years. In addition, the measure would increase these monthly COLAs, going forward, to account for five prior years when they would have been added to these members base pension payments but for the fully-funded requirement. Any future annual COLA adjustments enabled by the measure would be limited to $200 per month (or $2,400 annually).

The amendment also allows the Retirement Board to enter into an individual contract with SFERS executive directors hired on or after January 1, 2023. Currently, the Retirement Board must follow terms set out by the Civil Service Commission, the San Francisco Charter and Administrative Code, and the Memorandum of Understanding with the Municipal Executives Association.

How "A" Got on the Ballot

On July 19, 2022, the Board of Supervisors voted 11 to 0 to place Proposition A on the ballot. The Supervisors voted as follows:

Yes: Chan, Dorsey, Mandelman, Mar, Melgar, Peskin, Preston, Ronen, Safai, Stefani, Walton.

No: None.

This measure requires 50%+1 affirmative votes to pass.

Proponent’s Argument in Favor of Proposition A

Let's Protect San Francisco's Retirees

Yes on Proposition A to Ensure Retirement Security

Costs are rising and San Francisco has always been expensive. That's why retirees of the City and County of San Francisco were provided a cost of living adjustment (COLA) to their annual pension. This modest increase for the lowest wage retirees means the ability to afford housing and basic necessities like food and transportation.

In 1996, voters approved a measure, Proposition C, to provide this modest COLA to these retirees. In 2011, the COLA was removed in the years seniors need it the most. Today, about 4,400 retirees don't know from year to year whether they will get a modest increase as they plan for their futures.

The retirees impacted by this situation are generally older, including many above the age of 75. An overwhelming majority make less than $50,000 per year. Restoring the cost of living benefit would ensure equity for low wage workers that served the City and County of San Francisco.

You can help retirees so they don't have to choose between paying for food, housing, or prescription drugs due to the modest pension they receive and the high cost of living. That's why the Board of Supervisors unanimously voted to place this measure on the ballot.

Voting Yes on Prop A would mean restoring a benefit that these senior retired city workers earned throughout their years of service. It's the right thing to do!

Please join us in voting Yes on Prop A.

Supervisor Ahsha Safaí

Board of Supervisors President Shamann Walton

Supervisor Connie Chan

Supervisor Matt Dorsey

Supervisor Myrna Melgar

Supervisor Rafael Mandelman

Supervisor Aaron Peskin

Supervisor Dean Preston

Supervisor Hillary Ronen

Supervisor Catherine Stefani

Supervisor Shamann Walton

Arguments are the opinions of the authors and have not been checked for accuracy by any official agency. Arguments are published as submitted. Spelling and grammatical errors have not been corrected.

Rebuttal to Proponent’s Argument in Favor of Proposition A

No Rebuttal or Opponent’s Argument Against Proposition A Was Submitted

Arguments are the opinions of the authors and have not been checked for accuracy by any official agency. Arguments are published as submitted. Spelling and grammatical errors have not been corrected.

Paid Arguments in Favor of Proposition A

Paid Argument IN FAVOR of Proposition A

RESTORE RETIREMENT BENEFITS FOR RETIRED FIRE FIGHTERS, THEIR SPOUSES AND WIDOW(ER)S.

Proposition A restores a method of calculating annual retirement pay increases for older (average age 85) retirees, spouses and widow(er)s. Having been retired over 25 years, we have seen inflation erode our ability to remain independent. Support us and vote YES ON PROPOSITION A.

Leo Martinez, Vice-President

Retired Fire Fighters and Spouses Association of the San Francisco Fire Department

The true source(s) of funds for the printing fee of this argument: Retired Fire Fighters and Spouses Association of the San Francisco Fire Department.

Paid Argument IN FAVOR of Proposition A

As San Franciscans we must stand up and fight to have our most vulnerable retired SENIOR City Workers pension benefits restored

Prop A only applies to only 4,500 former city employees who retired before Nov. 6, 1996 who are being denied their supplemental Cost of Living Adjustment. This group of Seniors has an average age of 86 and older. Because of this group's advanced age, time is running out

Many of these retirees are now living on less than $22,000 a year.

These City workers on Prop A dedicated their lives to serving the City of San Francisco, only to have a pension benefit taken away. It is the only time in the history of San Francisco that a pension benefit was taken away

Let's right this wrong - before it's too late. Please vote YES on Prop A!

San Francisco Democratic County Central Committee

The true source(s) of funds for the printing fee of this argument: Vote Yes on A; Restore Retired City Workers Earned Benefits.

The three largest contributors to the true source recipient committee: 1. Protect Our Benefits, 2. Retired Firefighters & Spouses Association of the San Francisco Fire Department, 3. San Francisco Firefighters Local 798.

Paid Argument IN FAVOR of Proposition A

Vote Yes on Prop A - Restoring Retirees Pension Benefits

The Labor Community of San Francisco stands united in its effort to restore what our brother and sisters fought and earned working so hard for the City of San Francisco. Most workers gave 30 years of service and retired before November 6, 1996. They need your help with Yes Vote on Prop A. 75% of this small group of seniors are miscellaneous workers with benefits less than $22,000.

Join us in helping the very people that fought for our wages working conditions. Solidarity is at the core of the Labor movement. The time is now. Vote Yes on A!!!

San Francisco Labor Council

The true source(s) of funds for the printing fee of this argument: Vote Yes on A; Restore Retired City Workers Earned Benefits.

Paid Argument IN FAVOR of Proposition A

Vote Yes on Prop A- Restoring Retirees Pension Benefits

The Labor Community of San Francisco stands united in its effort to restore what our union brothers and sisters fought and earned working so hard for the City of San Francisco. Most workers gave 30 years of service and retired before November 6, 1996. They need your help with Yes Vote on Prop A. 75% of this small group of seniors are miscellaneous workers with benefits less than $22,000.

Join us in helping the very people that fought for our wages working conditions. Solidarity is at the core of Labor movement. The time is now, Vote Yes on A!!!

Larry Mazzola Jr.

The true source(s) of funds for the printing fee of this argument: Vote Yes on A; Restore Retired City Workers Earned Benefits.

Paid Argument IN FAVOR of Proposition A

As San Franciscans we must stand up and fight to have our most vulnerable retired SENIOR City Workers pension benefits restored

Many of these retirees are now living on less than $22,000 a year.

Let's right this wrong - before it's too late. Please vote YES on Prop A!

Latinx Democratic Club

The true source(s) of funds for the printing fee of this argument: Vote Yes on A; Restore Retired City Workers Earned Benefits.

Paid Argument IN FAVOR of Proposition A

As San Franciscans we must stand up and fight to have our most vulnerable retired SENIOR City Workers pension benefits restored

Many of these retirees are now living on less than $22,000 a year.

Let's right this wrong - before it's too late. Please vote YES on Prop A!

Marie Jobling

The true source(s) of funds for the printing fee of this argument: Vote Yes on A; Restore Retired City Workers Earned Benefits.

Paid Argument IN FAVOR of Proposition A

As San Franciscans we must stand up and fight to have our most vulnerable retired SENIOR City Workers pension benefits restored

Many of these retirees are now living on less than $22,000 a year.

Let's right this wrong - before it's too late. Please vote YES on Prop A!

Larry Griffin

The true source(s) of funds for the printing fee of this argument: Vote Yes on A; Restore Retired City Workers Earned Benefits.

End of Paid Arguments IN FAVOR of Proposition A

Arguments are the opinions of the authors and have not been checked for accuracy by any official agency. Arguments are published as submitted. Spelling and grammatical errors have not been corrected.

Paid Arguments Against Proposition A

No Paid Arguments AGAINST Proposition A Were Submitted

Arguments are the opinions of the authors and have not been checked for accuracy by any official agency. Arguments are published as submitted. Spelling and grammatical errors have not been corrected.

Legal Text

Describing and setting forth a proposal to the voters at an election to be held on November 8, 2022, to amend the Charter of the City and County of San Francisco to eliminate the full funding requirement for supplemental cost of living benefit payments to members of the San Francisco Employees’ Retirement System who retired before November 6, 1996, subject to a monthly monetary cap for retirees and their qualified survivors and beneficiaries in years that the Retirement System is not fully funded; adjust the base retirement allowance for these retirees, or their qualified survivors and beneficiaries, to account for supplemental cost of living adjustments not received in the years 2013, 2014, 2017, 2018 and 2019; and authorize the Retirement Board to enter into an individual contract with any Retirement System executive director hired on or after January 1, 2023.

Section 1. The Board of Supervisors hereby submits to the qualified voters of the City and County, at an election to be held on November 8, 2022, a proposal to amend the Charter of the City and County by revising Sections A8.526-3 and 12.100, to read as follows:

NOTE: Unchanged Charter text and uncodified text are in plain font.

Additions are single-underline italics Times New Roman font.

Deletions are strike-through italics Times New Roman font.

Asterisks (* * * *) indicate the omission of unchanged Charter subsections.

A8.526-3 SUPPLEMENTAL COST OF LIVING BENEFIT ON AND AFTER JANUARY 10, 2009

(a) Notwithstanding the provisions of Section A8.526-1 or any other provision of this Charter to the contrary, effective January 10, 2009, all supplemental cost of living benefits adjustments payable, including retirement allowances subject to change when the salary rate of a member is changed, shall be determined pursuant to the provisions of this Section A8.526-3 and not Section A8.526-1.

(b)(1) On July 1, 2009 and July 1 of each succeeding year, the retirement board shall determine whether, in the previous fiscal year, there were earnings in excess of the expected earnings on the actuarial value of the assets. In those years when the previous year’s earnings exceeded the expected earnings on the actuarial value of the assets, then on July 1 each retirement allowance or death allowance payable on account of a member who died, including retirement allowances subject to change when the salary rate of a member is changed, shall be increased by an amount equal to three and one-half percent (3.5%) of the allowance as of June 30, less the amount of any cost of living adjustment provided pursuant to Section A8.526-2 and less the amount of any cost of living adjustment, payable in that fiscal year, which is the result of a change in the salary of the member.

(b)(2) If on July 1, 2009 and July 1 of each succeeding year, the previous fiscal year’s earnings exceeded the expected earnings on the actuarial value of the assets, but they were insufficient to increase said allowances by three and one-half percent (3.5%) as provided in Subsection (b)(1), then to the extent of excess earning, said allowances shall be increased in increments of one-half percent (0.5%) up to the maximum three and one-half percent (3.5%) of the allowance as of June 30, less the amount of any cost of living adjustment provided pursuant to Section A8.526-2 and less the amount of any cost of living adjustment, payable in that fiscal year, which is the result of a change in the salary of the member.

(c) When the previous fiscal year’s earnings exceeded the expected earnings on the actuarial value of the assets but were not sufficient to fund any supplemental cost of living benefit adjustment pursuant to either Subsection (b)(1) or (b)(2), the Retirement Board shall reserve the excess earnings for that year. Said reserved earnings shall accumulate only until such time that said reserved earnings, plus the next year’s earnings in excess of the expected earnings on the actuarial value of the assets, are sufficient to fund one fiscal year’s increase in the supplemental cost of living benefit adjustment, at which time the earnings in reserve shall be withdrawn and used to fund a supplemental cost of living benefit adjustment as provided in either Subsection (b)(1) or (b)(2).

(d) To clarify the intent of the voters when originally enacting this Section in 2008, bBeginning on July 1, 2012 and July 1 of each succeeding year, no supplemental cost of living benefit adjustment shall be payable unless the Retirement System was also fully funded based on the market value of the assets for the previous year. Except as qualified in subsection (g), this subsection (d) shall apply only to employees and retirees hired on or after January 7, 2012.

(e) Any supplemental cost of living benefit adjustment, once paid to a member, shall not be reduced thereafter.

(f) Any Section or part of any Section in this Charter, insofar as it should conflict with the provisions of Section A8.526-3 or with any part thereof shall be superseded by the contents of Section A8.526-3. Section A8.526-3 shall be interpreted to be consistent with all federal and state laws, rules, and regulations. If any words, phrases, clauses, sentences, subsections, provisions or portions of Section A8.526-3 are held to be invalid or unconstitutional by a final judgment of a court, such decision shall not affect the validity of the remaining words, phrases, clauses, sentences, subsections, provisions or portions of Section A8.526-3. If any words, phrases, clauses, sentences, subsections, provisions or portions of Section A8.526-3 are held invalid as applied to any person, circumstance, employee or category of employee, such invalidity shall not affect any application of Section A8.526-3 which can be given effect. Section A8.526-3 shall be broadly construed to achieve its stated purposes.

(g) Effective January 1, 2023, subsection (d) shall not apply to any members who retired before November 6, 1996, or their qualified survivors and beneficiaries. But in any year that the Retirement System is not fully funded based on the market value of the assets for the previous year, the supplemental cost of living adjustment for these retirees, their qualified survivors, and beneficiaries shall be limited to $200 per month if their monthly gross pension allowance exceeds $4,167.

The Retirement System shall adjust the base retirement allowance of members who retired before November 6, 1996, or their qualified survivors and beneficiaries, to account for supplemental cost of living adjustments not received in 2013, 2014, 2017, 2018 and 2019, due to the full funding requirement in subsection (d). This aggregate base allowance adjustment shall not exceed $200 per month for those receiving a monthly gross pension allowance over $4,167. This subsection (g) does not entitle these retirees, their qualified survivors, or beneficiaries to any retroactive supplemental cost of living adjustment payments.

SEC. 12.100. RETIREMENT BOARD.

(a) The Retirement Board shall consist of seven members as follows: one member of the Board of Supervisors appointed by the President, three public members to be appointed by the Mayor pursuant to Section 3.100, and three members elected by the active members and retired persons of the Retirement System from among their number. The public members appointed by the Mayor shall be experienced in life insurance, actuarial science, employee pension planning or investment portfolio management, or hold a degree of doctor of medicine. There shall not be, at any one time, more than one retired person on the Board. The term of the members, other than the Board of Supervisors member, shall be five years, one term expiring on February 20th of each year. The three elected members need not be residents of the City and County. Vacancies on the Board shall be filled by the Mayor for the remainder of the unexpired term, except that in the case of elected employee members, a vacancy shall be filled by a special election within 120 days after the vacancy occurs unless the next regularly scheduled employee member election is to be held within six months after such vacancy occurred. Elections shall be conducted by the Director of Elections in a manner prescribed by ordinance.

(b) The Board shall appoint and may remove an executive director and an actuary. The executive director may be a joint Chief Executive Officer-Chief Investment Officer, or a Chief Executive Officer only. The Board may employ a consulting actuary.

Any executive director hired on or after January 1, 2023, shall be employed under an individual contract. Under the contract, the executive director’s compensation shall be comparable to the compensation of executive directors of public retirement systems in the United States who perform similar functions and that the Board, after an independent survey, determines most closely resemble the Retirement System in size, mission, and complexity. In addition, the Board may provide an incentive compensation bonus plan for the executive director based on performance goals established by the Board. For purposes of approving the executive director’s individual employment contracts, the Board may exercise all powers of the City and County, the Board of Supervisors, the Mayor, and the Director of Human Resources under Article XI of this Charter. The executive director’s individual employment contract shall not alter or interfere with the Retirement or Vacation provisions of this Charter or the Health Plans established by the City’s Health Service Board; provided however, that the Board may contribute toward defraying the cost of the executive director’s health premiums and retirement pick-up.

(c) In accordance with Article XVI, Section 17, of the California Constitution, the Retirement Board shall have plenary authority and fiduciary responsibility for investment of monies and administration of the Retirement System.

The Board shall be the sole authority and judge, consistent with this Charter and ordinances, as to the conditions under which members of the Retirement System may receive and may continue to receive benefits under the Retirement System, and shall have exclusive control of the administration and investment of such funds as may be established.

The Retirement Board shall discharge its duties with respect to the system with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of a like character and with like aims.

The Board shall determine City and County and District contributions on the basis of a normal contribution rate which shall be computed as a level percentage of compensation which, when applied to the future compensation of the average new member entering the System, together with the required member contribution, will be sufficient to provide for the payment of all prospective benefits of such member. The portion of liability not provided by the normal contribution rate shall be amortized over a period not to exceed twenty years.

(d) The Board may act by a majority of the members present at a meeting so long as a quorum is in attendance.

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