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HomeMy WebLinkAboutItem 6.7 PERS Contract CITY CLERK File # D[7]CZJ[ð]~~ AGENDA STATEMENT CITY COUNCIL MEETING DATE: July 19, 2005 SUBJECT: Public Hearing: Amendment to the City's Retirement Contract with the Board of Administration of the California Public Employees' Retirement System (CaIPERS). Report Prepared by: Julie Carter, Assistant to the City Manager ATTACHMENTS: 1. Ordinance RECOMMENDATlON:~ 1. 2. 3. 4. 5. Open the Public Hearing Receive Public Testimony Close the Public Hearing Deli berate Waive reading and ADOPT Ordinance FINANCIAL STATEMENT: Sufficient funding for the first year cost of the contract amendment has been included in the Fiscal Year 2005-2006 Budget. See below for full discussion on financial impact. DESCRIPTION: Each, year, the City Manager's Staff conducts a wage and benefit survey of approximately 33 Bay Area local government agencies. This survey is performed in an effort to keep the City's wage and benefit structure competitive with the market in which the City competes for labor. The City currently contracts for retirement benefits with the California Public Employees' Retirement System (CaIPERS) at the 2% at 55, Single Highest Year benefit level. During the recent market survey on retirement bcncfits the City discovered that 31 of the 33 Agencies the City includes in its salary survey have a CalPERS retirement system. Of those 31 Agencies 22 or 71 % have a retirement enhancement above the City's ClUTent 2% @ 55 formula. With respect to the 13 Alameda County Cities (not including Dublin) 11 or 85% have a retirement enhancement above the City's current 2% @ 55 formula. During this ycars discussions with employees' regarding wage and benefits, the City agrecd to take the necessary steps to amend its CalPERS contract to include 2.7% at 55 effective August 20, 2005. ____________________________________________________________________~_~MW___~_~______________________________ COPIES TO: ITEM NO.~ Hlcc-forms/agdastmt.do< lat>3 BENEFIT ENHANCEMENT COSTS There are several ways to measure costs with regard to this retirement benefit enhancement. The Dresent value of benefits represents the total dollars needed today to fund all future benefits for current members of the retirement plan. The increase in this amount must be paid by increases in future employer and future employee contributions. As such, the change in the present value of benefits (as listed below) due to the retirement enhancement represents the total "cost" of the amendment for ClUTent members of the retirement plan. Other ways to measure the costs are through the change in the employer and employee contribution rates and in the change to the "desirable" current funding level, the accrued liability. The change in the accrued liability is the "make-up" cost required to bring the "ideal" level of the City's assets in CalPERS up to the level they would have been if the City had been in the 2.7% at 55 formula all along. This amount is paid off over approximately 20 years as part of the increase in the employer contribution rate. As mentioned, CalPERS member (employee) rates also increase as a result of the 2.7% at 55 formula. There is a 1% of reportable earnings change to provide the 2.7% at 55 benefit formula. The member (employee) rate increases from 7% to 8%. The actuary study for this CaJPERS benefit enhancement was completcd in January 2005 based on the same June 30, 2003 data that was used to compute the employer rate for Fiscal Year 2005-2006. The City's employer rate for Fiscal Year 2005-2006 is 11.9% of payroll. The City's employer rate would increase in order to fund the new retirement benefit level by 4% of payroll. The revised Fiscal Year 2005-2006 employer rate will be 15.9%. As mentioned above, there is also a 1 % increase in the member (employee) rate to provide the 2.7% at 55 formula. The combined change in both rates is 5%. The City must certifY compliance under Government Code Section 7507 that the future annual costs of the proposed CalPERS contract amendment were made public. The following costs were determined by a CalPERS actuary valuation of the City's retirement plan: Change in the Present Value of Benefits Change in the Accrued Liability Change in the Total Employcr Rate Change in the Total Employee Rate $2,449,230 $1,111,757 3.938% (4.0%) 1.0% The increase in CalPERS retircmcnt costs in Fiscal Year 2005-2006 is $291,390. This is offset by approximately $121,109 in costs shared by City employees. This results in a total first year cost of $170,281. ORDINANCE ADOPTION The Dublin City Council adopted a Resolution of Intention to amend the City's contract with CalPERS on June 21, 2005 and introduced an Ordinance. The attached Ordinance (Attachment I) amends the contract between the City Council of the City of Dublin and thc Board of Administration of the Califomia Public Employees' Rctircmcnt System (CaIPERS) to provide for 2.7% at 55 formula. The contract amcndment will have an effective elate of August 20, 2005. The Ordinance also provides for the noticing requirement pursuant to Governmcnt Code Section 38933. 2df)3 In summary, as the City's survey indicatcd, recruiting qualified individuals within the Tri-Valley area has become increasingly more difficult for professional and management positions especially duc to a shrinking labor pool and the high cost of housing in the Bay Area. This high cost of housing makes it extremcly difficult to attract candidates ITom areas outside the Tri-Vallcy area. Many cities have switchcd to the 2.7% at 55 retirement benefit formula under CaIPERS. Several indicated that they changed to the plan in order to be competitive with other jurisdictions for recruiting purposes. The City Manager and his Staff have met with all regular employees to discuss the proposed amendment to the CalPERS contract and there was a majority agreement that City employees agreed to pay 2% of the 5% increase in CalPERS rates associated with implemcnting 2.7% at 55. One percent (1%) will be paid directly to CalPERS and one percent (1%) will be paid ITom future salary increases. This agreement amounts to the employees picking up the equivalent of 40% of the cost of the 2.7% at 55 retirement enhancement. The cost sharing agreement with City employees will be permanent. Staff recommends that the City Council open the Public Hearing, receive public testimony, close the Public Hearing, deliberate, waive reading and ADOPT the Ordinance. 3lIb;' lrtLf ORDINANCE NO. - 200S 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 1: 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 th.e 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 38933 ofthe Government Code of the State of California. PASSED AND ADOPTED by the City Council ofthe City of Dublin on this _ day of 2005. AYES: NOES: ABSENT: ABSTAIN: Mayor ATTEST: City Clerk 1-1'1-06 ~·7 A TT ACHMENT 1 " zoz¡Lt  CalPERS EXHIBIT A California Public Employees' Retirement System . 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 and July 1, 2000 which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows: A. Paragraphs 1 through 11 are hereby stricken from said contract as executed effective July 1, 2000, and hereby replaced by the following paragraphs numbered 1 through 12 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. PLEASE DO NOT SIGN IIEXHIBlT m: 3 Db t.f 3. 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). 4. 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. FIREFIGHTERS; AND b. POLICE OFFICERS. 5. 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 the effective date of this amendment to contract shall be determined in accordance with Section 21354 of said Retirement Law (2% at age 55 Full) 6. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous memb.er in employment on or after the effective date of this amendment to contract shall be determined in accordance with Section 21354.5 of said Retirement Law (2.7% at age 55 Full). 7. 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). 8. Public .A.gency, 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. 9. 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. tfo/)~ 10. 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. 11. 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. 12. 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 b~~¡:¡ètive on the day of ~~ ~ BOARD OF ADMINISTR.:\;¡;I~ CITY COUNCIL ~~ PUBLIC EMPLOYEES\~tìREMENT SYSTEM CITY OF DUBLIN ö.~ \S\ \~ ,,~ BY i cj,:;;' BY. "~" LORI MCGAf\"9"ND, ACTING CHIEF PRESIDING OFX\~èR ACTUARIJ\L,~ 'EMPLOYER SERVICES DIVISION ~,\-.:J~ PUBLIC. &ØPIOYEES' RETIREMENT SYSTEM ~~'J ,_,\:"" Witne e . '\) C . ... ".,,)1,." Attest: Clerk AMENDMENT ER# 1329 PERS-CON·702A (Rov. 8102)