All eyes are on District Council 37 as the city’s largest public employees’ union considers a new contract offer from the city that includes raising the retirement age for city employees from 57 to 62, and reducing pension benefits for new workers.

According to a New York Times report on DC 37’s negotiations, the city is proposing major changes to the pension system by creating what would be a new tier 5 plan for new employees.

Under this new plan the city would be able to change the benefit formula for city pensions so that new employees would have to work at least 25 years to qualify for the additional 2 percent of annual earnings that would be added to the pension for each year above 25 years on the job. Currently, workers need only have 20 years on the job to qualify for the additional 2 percent that is added to their pension each year thereafter. “Such a move would cut pensions for many future workers by at least 10 percent,” according to the Times.

In addition, the proposal would allow new employees to vest in the pension system after 10 years of work, instead of the current five years. It would also allow the city to calculate pension benefits based on the last five years of earnings rather than the last three years, which is currently the case. In basing pension benefits on five years’ worth of salary rather than three years’ worth, city workers in the inferior tier 5 plan, if created, would receive reduced pension benefits.

However, the proposal does not come as a surprise to municipal labor unions, since Mayor Bloomberg has raised the issue of pension reform many times in his State of the City addresses and his long-term executive budget proposals as part of a strategy to save the city money on fringe benefits and pension costs.

If DC 37 accepts Bloomberg’s contract offer in exchange for higher wage increases for its 125,000 members, the new pension proposal would also help the city save money by providing reduced benefits compared to the current plans, and requiring members to contribute 3 percent of their annual earnings for life, instead of the current 10 years.

“It is traditional for changes in pension issues to be discussed in a larger forum and with the participation of the Municipal Labor Committee because any changes would affect all city employees and not just the members of DC 37,” Local 237 President Carl Haynes said. However, any changes in the pension system would require state approval.