Tag: salary cap

Phoenix Considers Capping Pension Benefits, Other Changes; Measure Could Be on August Ballot

Arizona

The Phoenix City Council is debating whether to put a major pension measure on the August ballot, according to a report from the Arizona Republic.

The measure, designed to reduce the city’s future pension costs, would aim to eliminate pension “spiking” by putting a cap on the salary used to determine pension benefits.

But the measure would also reduce employees’ pension contribution rate.

The changes would only affect new hires, and wouldn’t apply to public safety workers.

More on the specifics of the changes, from the Arizona Republic:

Proposed changes aim to cap the size of future high earners’ retirements and combat the practice of pension spiking, or the artificial inflation of an employee’s income toward the end of a career to boost retirement benefits.

The proposed ballot initiative would cap the portion of future employees’ compensation used to determine pensions at $125,000, and require the city to contribute to a 401(k)-style retirement plan for any portion of salary above that amount. That move and changes to the retirement formula would reduce costs to the system, officials said.

[…]

Although the city estimates the new initiative cuts costs overall, it includes some changes that critics fear could increase pension expenses.

The committee’s recommended plan would reduce and cap the amount of money that new employees must contribute to their pensions at 11 percent of pay. City workers will soon pay more than 15.5 percent of their paychecks into the pension system, on top of the 6.2 percent they must put into Social Security — and their pension payment could climb to 17 percent in the next several years.

If the measure is implemented, the city expects savings of almost $39 million over 20 years.

The City Council will decide on Wednesday whether or not to put the measure on the August ballot.

If it makes the ballot, the fate of the measure will be in voters’ hands.

 

Photo credit: “Entering Arizona on I-10 Westbound” by Wing-Chi Poon – Own work. Licensed under CC BY-SA 2.5 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Entering_Arizona_on_I-10_Westbound.jpg#mediaviewer/File:Entering_Arizona_on_I-10_Westbound.jpg

UK Pension Funds Raise Concerns Over Bonuses, Pay of Corporate Executives

board room chair

U.S. public pension funds are no stranger to using their sway as major shareholders to push for corporate governance changes.

U.K. pension funds have that same influence – and this week, they used it to call for new rules surrounding executive bonuses and pay.

The pension funds say that executive compensation should be linked to company performance.

Reported by EveryInvestor:

In a letter sent to the chairmen of FTSE 350 businesses the National Association of Pension Funds warned that companies that have failed to create a strong link between executive rewards and performance should expect shareholders to repeat their concerns of spring 2012.

The NAPF also set out some guidelines it wants to see reflected in the pay policies set through 2014.

These include capping executive base pay increases at inflation and keeping them in line with the rest of the workforce. Where this is not the case, companies should offer a sound explanation.

The NAPF also criticised the use of peer group benchmarking where pay is set by comparing it to that of other executives from different companies. The NAPF believes this practice has contributed to the escalation of boardroom pay. It said boards should focus more on their own strategies and less on comparing themselves against their peers.

Ahead of the NAPF Investment Conference that opens in Edinburgh on Wednesday Joanne Segars, chief executive, NAPF, said shareholders were vocal last year and those companies that have failed to take a robust stance on boardroom pay should expect similar opposition this spring.

“Too many companies have allowed the link between pay and long-term business performance to weaken in recent years,” she said.

“Companies should keep executive base pay rises in line with the rest of the workforce, and those that deviate from that should have a good explanation ready. Bonus targets should be challenging and allied to the long-term growth of the business.

“Our members will push back on executives who compare themselves with others to try to justify pay rises. So-called peer comparisons have been a major factor behind rising boardroom pay levels.

Read the letter here.