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HomeMy WebLinkAboutItem 6.1 CalPERS Agmt Amend 0 '(dip �" STAFF REPORT CITY CLERK �} 82 I9 % CITY COUNCIL File # 600-50_ DATE: August 21, 2012 TO: Honorable Mayor and City Councilmembers FROM: Joni Pattillo, City Manager&a, � 4 SUBJECT: Amendment to the City's Retirement Contract with the Board of Administration of the California Public Employees' Retirement System (CaIPERS). Prepared by Julie E. Carter, Human Resources Director EXECUTIVE SUMMARY: The City Council will consider an amendment to the contract with the Board of Administration of the California Public Employees' Retirement System to provide Employee Cost Sharing of Additional Benefits as defined under Article 2, Section 20516 of the California Public Employee Retirement Law (PERL). The proposed amendment increases City employee contributions to their CaIPERS retirement costs and thus decreases the employer's retirement program costs. Employee CaIPERS deductions will be made on a pre-tax basis under Internal Revenue Code (IRC) Section 414 (h) (2) which was previously adopted by the City. FINANCIAL IMPACT: Cei If approved, the projected savings to the City for Fiscal Year 2012-2013 is approximately $151,635. It is expected that this action will result in additional costs savings in future years. RECOMMENDATION: Staff recommends that the City Council: 1) open the public hearing; 2) receive public testimony; 3) close the public hearing; 4) deliberate; 5) adopt the Resolution of Intention to approve an amendment to contract between the Board of Administration California Public Employees' Retirement System (CaIPERS) and the City Council City of Dublin, and 6) waive reading and introduce the Ordinance authorizing an amendment to the contract between the City of Dublin and the Board of Administration of the California Public Employees' Retirement System. (1/t-' ( Submitted By- Reviewed By Human Resources Director Assistant City Manager DESCRIPTION: CBackground Page 1 of 3 ITEM NO 6.1 During the prior year's discussions with City employees regarding wage and benefits, the City Council and City employees agreed to take the necessary steps to have employees pay the full 8% portion of their CalPERS retirement. This benefit adjustment occurred on July 2, 2011. In the recent months, the City Manager has been exploring additional ways to further partner with City employees regarding the CalPERS retirement program in an effort to address future financial liabilities. After reviewing several cost containment programs, it was determined that the best alternative was Employee Cost Sharing of Additional Benefits as defined under Section 20516 of the California Public Employee Retirement Law (PERL). Employee Cost Sharing of Additional Benefits - Resolution of Intention The City Manager requested that the City's Human Resources Division commission CalPERS to perform an actuary study of Employee Cost Sharing of Additional Benefits to determine the maximum amount the City could establish with employees. Employee Cost Sharing of Additional Benefits is defined in Article 2- Contract Provisions, Section 20516 of the California Public Employees Retirement Law (PERL) and provides for employees sharing the costs of additional retirement benefits. The maximum cost sharing amounts (percentages) permitted by law for member agencies are determined from past CalPERS contract amendments. To implement any changes to the City's retirement program, it is necessary to amend to City's existing contract with CalPERS. The Resolution of Intention (Attachment 1) authorizes staff to work with CalPERS to amend the City's contract to add Employee Cost Sharing of Additional Benefits. In addition, adoption of the contract amendment requires adoption of an Ordinance (Attachment 2). The CalPERS rate for employers is comprised of two components which make -up the final required employer contribution for any given year. The first component represents the normal cost of benefits and the second represents the current unfunded liability of benefits. An amendment to allow Employee Cost Sharing of Additional Benefits provides an opportunity for City employees to share in both; the normal costs of previous contract enhancements and the unfunded liability portion of the benefit for a period not to exceed twenty years from the date in which the contract enhancement was approved. It is the City's desires to reach the maximum amount of cost sharing through an employee variable rate progression beginning in October 2012, starting with a rate of 1.75 %. In future years, increases to employee cost sharing amounts, up to the 4.072% maximum, will be determined during a review of the February Consumer Price Index (CPI) — All Urban Wage Earnings and the City's Fiscal Year budget process. As previously established by the City Council, employee CalPERS deductions shall be made on a pre -tax basis under Internal Revenue Code (IRC) Section 414 (h) (2). The projected savings to the City for Fiscal Year 2012- 2013 is approximately $151,635. The City must certify compliance under Government Code Section 7507 that the future annual costs of the proposed CalPERS contract amendment were made public. Employee Cost Sharing of Additional Benefits positively impacts the City of Dublin because it reduces the overall costs associated with providing employee retirement benefits as determined by a CalPERS actuary valuation. Adoption of the Resolution of Intention complies with Government Code Section 7507. Page 2 of 3 Additionally, Government Code Section 20474 requires a secret ballot election by employees affected whenever a CalPERS contract is amended to provide a benefit that changes the employees' rate of contribution. The ballot election is scheduled for August 28, 2012 as part of the City Manager's general employee meeting. Approval of the attached Resolution of Intention and introduction of the Ordinance authorize CalPERS to begin the City's contract amendment process. It is anticipated that adoption of the Ordinance will occur on September 18, 2012. The effective date of the Ordinance will be October 18, 2012 and the effective date of the CalPERS contract amendment shall be October 20, 2012 which is the beginning of the first pay period after the effective date of the Ordinance. NOTICING REQUIREMENTS /PUBLIC OUTREACH: The Ordinance shall take effect thirty (30) days after the date of its adoption, and prior to the expiration of fifteen (15) days from the passage thereof, the City Clerk of the City of Dublin shall cause the Ordinance to be posted in at least three (3) public places in the City of Dublin in accordance with Section 36933 of the Government Code of the State of California. ATTACHMENTS: 1. Resolution of Intention to approve an Amendment to Contract between the Board of Administration California Public Employees' Retirement System (CaIPERS) and the City Council City of Dublin (with Exhibit). 2. Ordinance of the City of Dublin Authorizing an Amendment to Contract between the City of Dublin and the Board of Administration of the California Public Employees' Retirement System (with Exhibit A). Page 3 of 3 RESOLUTION NO. - 12 A RESOLUTION OF INTENTION TO APPROVE AN AMENDMENT TO CONTRACT BETWEEN THE BOARD OF ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (CaIPERS) AND THE CITY COUNCIL CITY OF DUBLIN WHEREAS, the Public Employees' Retirement Law permits the participation of public agencies and their employees in the Public Employees' Retirement System by the execution of a contract, and sets forth the procedure by which said public agencies may elect to subject themselves and their employees to amendments to said Law; and WHEREAS, one of the steps in the procedures to amend this contract is the adoption by the governing body of the public agency of a resolution giving notice of its intention to approve an amendment to said contract, which resolution shall contain a summary of the change proposed in said contract; and WHEREAS, the following is a statement of the proposed change: To provide Section 20516 (Employees Sharing Cost of Additional Benefits) applicable to Section 21354.5 (2.7% @ 55 Full formula) effective August 20, 2005 and Section 20042 (One -Year Final Compensation) effective July 1, 2000 for local miscellaneous members. The maximum employee cost sharing contribution is the normal cost plus the increase in the accrued liability due to the benefit improvement amortized over 20 years. In no event shall the employee cost sharing contribution attributable to the unfunded liability remain in effect beyond August 20 preceding the 20th anniversary of the effective date of the additional benefits. Therefore, after August 20, 2025 in any given contribution year, the maximum employee cost sharing contribution cannot exceed 4.072 %. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby give notice of intention to approve an amendment to the contract between the City of Dublin and the Board of Administration of the California Public Employees' Retirement System (Ca1PERS), a copy of said amendment being attached hereto, as an "Exhibit" and by this reference made a part hereof, and to authorize staff to work with Ca1PERS to finalize such contract amendment. PASSED, APPROVED AND ADOPTED this 21" day of August 2012. AYES: NOES: ABSENT: ABSTAIN: ATTEST: City Clerk Mayor ATTACHMENT 1 Af�o,,00--00,,- CaIPGRS California Public Employees' Retirement System EXHIBIT AMENDMENT TO CONTRACT Between the Board of Administration California Public Employees' Retirement System and the City Council City of Dublin The Board of Administration, California Public Employees' Retirement System, hereinafter referred to as Board, and the governing body of the above public agency, hereinafter referred to as Public Agency, having entered into a contract effective February 1, 1983, and witnessed December 13, 1982, and as amended effective April 12, 1986, November 21, 1987, July 1, 2000 and August 20, 2005 which provides for participation of Public Agency. in said System, Board and Public Agency hereby agree as follows: A. Paragraphs 1 through 12 are hereby stricken from said contract as executed effective August 20, 2005, and hereby replaced by the following paragraphs numbered 1 through 13 inclusive: 1. All words and terms used herein which are defined in the Public Employees' Retirement Law shall have the meaning as defined therein unless otherwise specifically provided. "Normal retirement age" shall mean age 55 for local miscellaneous members. 2. Public Agency shall participate in the Public Employees' Retirement System from and after February 1, 1983 making its employees as hereinafter provided, members of said System subject to all provisions of the Public Employees' Retirement Law except such as apply only on election of a contracting agency and are not provided for herein and to all amendments to said Law hereafter enacted except those, which by express provisions thereof, apply only on the election of a contracting agency. 3. Public Agency agrees to indemnify, defend and hold harmless the California Public Employees' Retirement System (CaIPERS) and its trustees, agents and employees, the CaIPERS Board of Administration, and the California Public Employees' Retirement Fund from any claims, demands, actions, losses, liabilities, damages, judgments, expenses and costs, including but not limited to interest, penalties and attorneys fees that may arise as a result of any of the following: (a) Public Agency's election to provide retirement benefits, provisions or formulas under this Contract that are different than the retirement benefits, provisions or formulas provided under the Public Agency's prior non - CaIPERS retirement program. (b) Public Agency's election to amend this Contract to provide retirement benefits, provisions or formulas that are different than existing retirement benefits, provisions or formulas. (c) Public Agency's agreement with a third party other than CaIPERS to provide retirement benefits, provisions, or formulas that are different than the retirement benefits, provisions or formulas provided under this Contract and provided for under the California Public Employees' Retirement Law. (d) Public Agency's election to file for bankruptcy under Chapter 9 (commencing with section 901) of Title 11 of the United States Bankruptcy Code and/or Public Agency's election to reject this Contract with the CaIPERS Board of Administration pursuant to section 365, of Title 11, of the United States Bankruptcy Code or any similar provision of law. (e) Public Agency's election to assign this Contract without the prior written consent of the CaIPERS' Board of Administration. (f) The termination of this Contract either voluntarily by request of Public Agency or involuntarily pursuant to the Public Employees' Retirement Law. (g) Changes sponsored by Public Agency in existing retirement benefits, provisions or formulas made as a result of amendments, additions or deletions to California statute or to the California Constitution. 4. Employees of Public Agency in the following classes shall become members of said Retirement System except such in each such class as are excluded by law or this agreement: a. Employees other than local safety members (herein referred to as local miscellaneous members). 5. In addition to the classes of employees excluded from membership by said Retirement Law, the following classes of employees shall not become members of said Retirement System: a. FIREFIGHTER, AND b. POLICE OFFICERS. 6. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member in employment before and not on or after August 20, 2005 shall be determined in accordance with Section 21354 of said Retirement Law (2% at age 55 Full). 7. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member in employment on or after August 20, 2005 shall be determined in accordance with Section 21354.5 of said Retirement Law (2.7% at age 55 Full). 8. Public Agency elected and elects to be subject to the following optional provisions: a. Section 20938 (Limit Prior Service to Members Employed on Contract Date). b. Section 21573 (Third Level of 1959 Survivor Benefits). C. Section 20042 (One -Year Final Compensation). d. Section 20516 (Employees Sharing Cost of Additional Benefits): Section 21354.5 (2.7% [,}a 55 Full formula) effective August 20, 2005 and Section 20042 (One -Year Final Compensation) effective July 1, 2000 for local miscellaneous members. The employee cost sharing contributions are not to exceed 4.072 %. 9. Public Agency, in accordance with Government Code Section 20834, shall not be considered an "employer" for purposes of the Public Employees' Retirement Law. Contributions of the Public Agency shall be fixed and determined as provided in Government Code Section 20834, and such contributions hereafter made shall be held by the Board as provided in Government Code Section 20834. 10. Public Agency shall contribute to said Retirement System the contributions determined by actuarial valuations of prior and future service liability with respect to local miscellaneous members of said Retirement System. 11. Public Agency shall also contribute to said Retirement System as follows: a. Contributions required per covered member on account of the 1959 Survivor Benefits provided under Section 21573 of said Retirement Law. (Subject to annual change.) In addition, all assets and liabilities of Public Agency and its employees shall be pooled in a single account, based on term insurance rates, for survivors of all local miscellaneous members. b. A reasonable amount, as fixed by the Board, payable in one installment within 60 days of date of contract to cover the costs of administering said System as it affects the employees of Public Agency, not including the costs of special valuations or of the periodic investigation and valuations required by law. C. A reasonable amount, as fixed by the Board, payable in one installment as the occasions arise, to cover the costs of special valuations on account of employees of Public Agency, and costs of the periodic investigation and valuations required by law. 12. Contributions required of Public Agency and its employees shall be subject to adjustment by Board on account of amendments to the Public Employees' Retirement Law, and on account of the experience under the Retirement System as determined by the periodic investigation and valuation required by said Retirement Law. 13. Contributions required of Public Agency and its employees shall be paid by Public Agency to the Retirement System within fifteen days after the end of the period to which said contributions refer or as may be prescribed by Board regulation. If more or less than the correct amount of contributions is paid for any period, proper adjustment shall be made in connection with subsequent remittances. Adjustments on account of errors in contributions required of any employee may be made by direct payments between the employee and the Board. B. . This amendment shall be effective on the day of , BOARD OF ADMINISTRATION CITY COUNCIL PUBLIC EMPLOYEES' RETIREMENT SYSTEM CITY OF DUBLIN BY KAREN DE FRANK, CHIEF CUSTOMER ACCOUNT SERVICES DIVISION PUBLIC EMPLOYEES' RETIREMENT SYSTEM AMENDMENT CaIPERS ID #6598538431 PERS- CON -702A BY PRESIDING OFFICER Witness Date Attest: Clerk ORDINANCE NO. — 2012 AN ORDINANCE OF THE CITY OF DUBLIN AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY OF DUBLIN AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM THE CITY COUNCIL OF THE CITY OF DUBLIN DOES ORDAIN AS FOLLOWS: Section l: ADOPTION OF CONTRACT AMENDMENT The adoption of the contract amendment, a copy of which is attached hereto as Exhibit A and incorporated herein, between the City Council of the City of Dublin and the Board of Administration of the California Public Employees' Retirement System is hereby authorized. Section 2: EXECUTION OF AMENDMENT The Mayor of the City of Dublin is hereby authorized, empowered and directed to execute said contract amendment for and on behalf of the City of Dublin. Section 3: EFFECT: POSTING This Ordinance shall take effect thirty (30) days after the date of its adoption, and prior to the expiration of fifteen (15) days from the passage thereof, the City Clerk of the City of Dublin shall cause this Ordinance to be posted in at least three (3) public places in the City of Dublin in accordance with Section 36933 of the Government Code of the State of California. PASSED AND ADOPTED by the City Council of the City of Dublin on this day of , 2012 AYES: NOES: ABSENT: ABSTAIN: ATTEST: City Clerk Mayor ATTACHMENT 2 CaINeas California Public Employees' Retirement System EXHIBIT Between the Board of Administration California Public Employees' Retirement System and the City Council City of Dublin �a. The Board of Administration, California Public Employees' Retirement System, hereinafter referred to as Board, and the governing body of the above public agency, hereinafter referred to as Public Agency, having entered into a contract effective February 1, 1983, and witnessed December 13, 1982, and as amended effective April 12, 1986, November 21, 1987, July 1, 2000 and August 20, 2005 which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows: A. Paragraphs 1 through 12 are hereby stricken from said contract as executed effective August 20, 2005, and hereby replaced by the following paragraphs numbered 1 through 13 inclusive: 1. All words and terms used herein which are defined in the Public Employees' Retirement Law shall have the meaning as defined therein unless otherwise specifically provided. "Normal retirement age" shall mean age 55 for local miscellaneous members. 2. Public Agency shall participate in the Public Employees' Retirement System from and after February 1, 1983 making its employees as hereinafter provided, members of said System subject to all provisions of the Public Employees' Retirement Law except such as apply only on election of a contracting agency and are not provided for herein and to all amendments to said Law hereafter enacted except those, which by express provisions thereof, apply only on the election of a contracting agency. 3. Public Agency agrees to indemnify, defend and hold harmless the California Public Employees' Retirement System (CaIPERS) and its trustees, agents and employees, the CaIPERS Board of Administration, and the California Public Employees' Retirement Fund from any claims, demands, actions, losses, liabilities, damages, judgments, expenses and costs, including but not limited to interest, penalties and attorneys fees that may arise as a result of any of the following: (a) Public Agency's election to provide retirement benefits, provisions or formulas under this Contract that are different than the retirement benefits, provisions or formulas provided under the Public Agency's prior non - CaIPERS retirement program. (b) Public Agency's election to amend this Contract to provide retirement benefits, provisions or formulas that are different than existing retirement benefits, provisions or formulas. (c) Public Agency's agreement with a third party other than CaIPERS to provide retirement benefits, provisions, or formulas that are different than the retirement benefits, provisions or formulas provided under this Contract and provided for under the California Public Employees' Retirement Law. (d) Public Agency's election to file for bankruptcy under Chapter 9 (commencing with section 901) of Title 11 of the United States Bankruptcy Code and/or Public Agency's election to reject this Contract with the CaIPERS Board of Administration pursuant to section 365, of Title 11, of the United States Bankruptcy Code or any similar provision of law. (e) Public Agency's election to assign this Contract without the prior written consent of the CaIPERS' Board of Administration. (f) The termination of this Contract either voluntarily by request of Public Agency or involuntarily pursuant to the Public Employees' Retirement Law. (g) Changes sponsored by Public Agency in existing retirement benefits, provisions or formulas made as a result of amendments, additions or deletions to California statute or to the California Constitution. 4. Employees of Public Agency in the following classes shall become members of said Retirement System except such in each such class as are excluded by law or this agreement: a. Employees other than local safety members (herein' referred to as local miscellaneous members). 5. In addition to the classes of employees excluded from membership by said Retirement Law, the following classes of employees shall not become members of said Retirement System: a. FIREFIGHTER; AND b. POLICE OFFICERS. 6. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member in employment before and not on or after August 20, 2005 shall be determined in accordance with Section 21354 of said Retirement Law (2% at age 55 Full). 7. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member in employment on or after August 20, 2005 shall be determined in accordance with Section 21354.5 of said Retirement Law (2.7% at age 55 Full). 8. Public Agency elected and elects to be subject to the following optional provisions: a. Section 20938 (Limit Prior Service to Members Employed on Contract Date). b. Section 21573 (Third Level of 1959 Survivor Benefits). c. Section 20042 (One -Year Final Compensation). d. Section 20516 (Employees Sharing Cost of Additional Benefits): Section 21354.5 (2.7% @ 55 Full formula) effective August 20, 2005 and Section 20042 (One -Year Final Compensation) effective July 1, 2000 for local miscellaneous members. The employee cost sharing contributions are not to exceed 4.072 %. 9. Public Agency, in accordance with Government Code Section 20834, shall not be considered an "employer" for purposes of the Public Employees' Retirement Law. Contributions of the Public Agency shall be fixed and determined as provided in Government Code Section 20834, and such contributions hereafter made shall be held by the Board as provided in Government Code Section 20834. 10, Public Agency shall contribute to said Retirement System the contributions determined by actuarial valuations of prior and future service liability with respect to local miscellaneous members of said Retirement System. 11. Public Agency shall also contribute to said Retirement System as follows: a. Contributions required per covered member on account of the 1959 Survivor Benefits provided under Section 21573 of said Retirement Law. (Subject to annual change.) In addition, all assets and liabilities of Public Agency and its employees shall be pooled in a single account, based on term insurance rates, for survivors of all local miscellaneous members. b. A reasonable amount, as fixed by the Board, payable in one installment within 60 days of date of contract to cover the costs of administering said System as it affects the employees of Public Agency, not including the costs of special valuations or of the periodic investigation and valuations required by law. C. A reasonable amount, as fixed by the Board, payable in one installment as the occasions arise, to cover the costs of special valuations on account of employees of Public Agency, and costs of the periodic investigation and valuations required by law. 12. Contributions required of Public Agency and its employees shall be subject to adjustment by Board on account of amendments to the Public Employees' Retirement Law, and on account of the experience under the Retirement System as determined by the periodic investigation and valuation required by said Retirement Law. 13. Contributions required of Public Agency and its employees shall be paid by Public Agency to the Retirement System within fifteen days after the end of the period to which said contributions refer or as may be prescribed by Board regulation. If more or less than the correct amount of contributions is paid for any period, proper adjustment shall be made in connection with subsequent remittances. Adjustments on account of errors in contributions required of any employee may be made by direct payments between the employee and the Board. B. . This amendment shall. be effective on the day of , BOARD OF ADMINISTRATION CITY COUNCIL PUBLIC EMPLOYEES' RETIREMENT SYSTEM CITY OF DUBLIN BY KAREN DE FRANK, CHIEF CUSTOMER ACCOUNT SERVICES DIVISION PUBLIC EMPLOYEES' RETIREMENT SYSTEM AMENDMENT CaIPERS ID #6598539431 PERS- CON -702A Ioffi1 PRESIDING OFFICER Witness Date F.1110 i Clerk