About 5,500 of Philadelphia's non-union employees and supervisors will receive a 2.5% pay raise as part of a new compensation and benefits overhaul package that will take effect Oct. 1.

"At the heart of this compensation package is a connection between employee pay raises and benefits reform that will move the city toward fiscal sustainability," Mayor Michael Nutter said in a statement last week.

The raises and other changes will cost Philadelphia $17 million through fiscal year 2017 and will come out of the city's general fund, which has a budget of $3.6 billion this year, and a projected fiscal year 2017 fund balance of about $60 million.

The package will also restore step and longevity increments, which were frozen in 2009, increase employee contributions to health care plans, and proposed pension changes.

Proposed pension legislation would place new employees in a hybrid plan that has a defined benefit provision and a 401(k)-style defined contribution component.

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