After a long and arduous three-year battle between the City of Long Beach and the largest city labor organization, The International Association of Machinists (IAM), it was announced Wednesday that an agreement has finally been reached between the two parties that proffers a much-needed reduction in pension costs.

Details of the agreement have been released since the IAM’s voting process has been completed—meaning the only step left is to formalize the agreement via a public discussion and vote at an upcoming city council meeting. The agreement is the first announced attempt at creating pension reform and generate savings for cash-strapped Long Beach since a City proposal was rejected by IAM workers last August. In his statements after the last agreement failed, Mayor Bob Foster said that if the group remained “intractable,” he would be forced to place a pension measure on a future ballot.

The new agreement approved by IAM has different provisions for new-hires over current employees, mainly being that employees hired after January 1 of this year will receive two percent of their salary for every year they work if they retire at age 62, per the recently Governor-approved state law pension requirements. In other words, if you work 40 years and retire at 62 you will receive 80 percent of your salary throughout your retired years.

Current employees, however, continue to hold onto their previous pension benefits: 2.5 percent of their salaries for every year they work before retiring at age 55. The deal calls for the IAM using the remaining raises they have in their contract of 5% to be applied to the employee’s share of pension costs.  When complete, current employees will be paying the full employee share of 8% of salary.

The landmark agreement will save the City significantly, with $3.8 million from the General Fund and $11.8 million in all funds. By 2023, officials say it will have saved the City some $40.1 million from the General Fund and $125.5 million in all funds.

“Today’s vote means savings of $11.8 million dollars next year and creates a more sustainable system for the future,” said Mayor Bob Foster in a statement. “I thank each of the city employees who voted for these reforms and applaud the IAM leadership for their efforts.”

The current IAM contract—under a provision that no one would be laid off through September 30 of this year—has been extended for an additional year through September 30, 2014.