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PERS thus protecting the fiscal integrity of cities and PERS retirement for public employees. This could include jointly sponsoring an initiative if legislative change is insufficient. ACTIONS CITIES CAN AND ARE TAKING NOW AT THE COLLECTIVE BARGAINING TABLE TO REDUCE COSTS 1. Have employees pay the employee's share of PERS costs: 7-8% for miscellaneous employees and 8-9% for safety employees. 2. Provide a two-tier retirement system with new hires being placed in a reduced benefit tier. 3. Allow employees to pick-up a portion of the employer's PERS costs up to PERS limits through negotiation to better share the normal costs of pensions. 4. Base final retirement salary on the three highest years worked. 5. Eliminate the PERS contract option of including Employer Paid Member Contribution (EPMC) in the calculation of an employee's base pay for retirement purposes. A City Managers Department survey in February 2011 indicates one in five cities responding to the survey have implemented a second tier for new hires. Further,the majority of cities surveyed (61%) are currently negotiating pension reforms. ACTIONS NEEDED FROM THE STATE TO RESTORE THE SUSTAINABILITY OF PENSION PROGRAMS Courts have held that current and former local government employees have rights to the pensions promised them at hiring. As such, the following recommendations most likely would not pertain to former employees or the prospective benefits of current employees. A Defined Benefit Plan is the most effective vehicle to accumulate and distribute pension benefits and is the preferred retirement system for municipal employees. According to staff of the National Institute of Retirement Security, dollar for dollar, a Defined Benefit Plan yields considerably more(46%)retirement savings than a Defined Contribution Plan. The subsequent action items can be considered individually or in combination to improve the sustainability of PERS, thus, re-designing a system that will contribute to safeguarding public pensions. The following recommendations, with support from labor, would level the field on a statewide basis and lead to a maintainable PERS for public employees. 1. Repeal SB400/AB616 returning to more sustainable PERS benefit formulas of 2% at 60 for miscellaneous employees and 2%at 55 for safety employees. 2. Have PERS provide more formula choices with lower benefit local options. 3. Base final retirement salary on three highest paid years worked. 4. Prohibit enhancing the second tier pension formulas for twenty years. 5. Calculate benefits only on base salary eliminating all "spiking."No overtime, vacation or sick leave included in the pension calculation. 6. Eliminating the purchase of"air time"(purchase of time not served). 2