HomeMy WebLinkAboutItem 8.2 Review Emp Retirement Contract Options CITY OF DUBLIN '1,2-o nn
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AGENDA STATEMENT
CITY COUNCIL MEETING DATE: August 26, 1985
SUBJECT Review of Public Employees' Retirement System Contract
Options
EXHIBITS ATTACHED No
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RECOMMENDATION Receive report and direct Staff as appropriate
FINANCIAL STATEMENT: See Discussion
DESCRIPTION At the regular City Council meeting on August 12 ,
1985 , Staff was directed to prepare a review of the current Public
Employees ' Retirement System ( PERS ) contract options .
At the regular City Council meeting on August 9, 1982 , the City Council
discussed the contract options under the retirement program. Among the
options was the inclusion or exclusion of elected officials . It was
determined at that time to exclude elected officials from the PERS program.
Currently, full time City employees are covered by this program. It
provides for retirement benefits calculated at 2% of the final compensation
for each year of service at a retirement age of 60. (For example , a person
who has 5 years of service and has reached age 60 would receive a benefit of
10% of his salary) . The employee contributes 7% of their gross wages ,
exclusive of any overtime earnings . The City must contribute at a rate ,
which is adjusted on an annual basis . The rate is adjusted pursuant to
actuarial studies based on the composition of the City ' s work force . The
City ' s contribution rate for 1985-86 is 7.878%.
Under the PERS program, if the City Council requested removal of the
exclusion for elective officers , PERS would require a valuation. The cost
of this study would be $151 . If the elective officials are not specifically
excluded from the membership by contract , each official would have the
option to elect coverage under the system. The State Government Code
provides that the elective officials exclusion includes members of the . City
Council and the City Attorney. Staff has contacted the PERS Membership
Division and they have indicated that 3 options would exist for removal of
the exclusion. The options are as follows :
1 ) The exclusion could be removed with the right to participate open to
all prior and current elective officials .
2 ) The removal can be made to apply only to those holding office at the
time that the contract is amended and they may be credited for prior
service.
3 ) The exclusion may be removed for those holding office at the time that
the contract is amended, and no credit is given for prior service .
If the exclusion was removed , elected officials who chose to participate in
the program would incur a deduction from their salary of 7%. In addition,
the City would contribute 7 .878% of the Councilmembers ' salary. Based on
the current City Council salary of $165 , and assuming 5 elected officials
participated , the cost to the City would be approximately $780 per year.
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COPIES TO :
ITEM NO. 8 , 2—
AGENDA STATEMENT: Review of PERS Contract Options
Page 2
As noted above , the removal of the exclusion would also be applicable to the
City Attorney. State Law includes the office of City Attorney as an
elective office without regard to it ' s elective status .- Therefore , the City
Attorney would also have the option of participating in the PERS program.
The exact amount contributed by the City would be dependent on the amount of
professional legal expenses .
Staff has also evaluated the contract option for a member to have up to 4
years of military service credited as public service . This option is not a
part of the City ' s current contract . If this option were selected , it is
estimated that the City' s contribution rate would increase by a minimum of
1% to a total of 8 .878/ of the City' s payroll . Based on the most recent pay
period including 9 full time employees , the cost to the City per year would
be a minimum of $2 , 500. This cost would increase once the City filled the
positions which are currently vacant . When this option is provided , it then
becomes applicable for all of the current employees of the agency as well as
future employees . This contract option also requires that the employee
contribute a lump sum payment equal to both the employer' s and the
employee ' s contribution rate . This payment is calculated on the member' s
compensation at the first period of service with the City following their
military service .
The City of Dublin currently provides health insurance to full time
employees through the PERS Public Employees Medical and Hospital Care Act .
The health benefits contract requires that all PERS Retirement Program
members and annuitants must be offered coverage . If the City Council
elected to remove the exclusion for elective officers , any individuals who
selected retirement coverage would then also become eligible to participate
in the health insurance program. The City currently provides a maximum City
contribution of $224 plus the administrative costs charged by PERS . The
program requires that the City contribute equally towards both current
members and annuitants . This requirement establishes an obligation for the
City while participating in the program, to contribute $224 per month to
retired employees who have retired under the PERS program from the City of
Dublin.
In order to retire under PERS , an individual must be 60 years old and have
service credit equal to 5 years . The City selected to enter into this
program due to the options it afforded a City with a small Staff. A small
group attempting to acquire health insurance is difficult . Staff has
continued to evaluate options to obtain insurance independent of this
program, however, due to the small size of the group and the current
composition, it is most advantageous to pool resources under the PERS health
insurance program.
It is estimated that the City would incur an additional annual cost of
$13 ,800 if each of the Councilmembers elected to particpate in the health
insurance program. This estimate includes administrative charges and
assumes the use of the maximum City contribution. Again, the City Attorney
would also be eligible for this program provided that the elected official
inclusion was removed from the PERS agreement .
City Staff will be available to answer any questions regarding the
retirement program. If the City Council desires to pursue any additional
options to the contract , it would be appropriate to direct Staff to request
a valuation of the City ' s retirement program.