HomeMy WebLinkAboutItem 6.3 PERS Benefit Plan CITY CLERK
File #0720-60
AGENDA STATEMENT
CITY COUNCIL MEETING DATE: May 16, 2000
SUBJECT:
Public Hearing: Amendment to the City's Retirement Contract
with the Board of Administration of the California Public
Employees' Retirement System (PERS) and Adoption of Resolution
Amending the Benefit Plan
Report Prepared by: Julie Carter, Assistant to the City Manager
ATTACHMENTS:
1. Ordinance
2. Resolution Amending the Benefit Plan
RECOMMENDATION:
1. Open the Public Hearing
2. Receive Public Testimony
3. Close Public Hearing
4. Deliberate
5. Waive reading and ADOPT Ordinance
6. Adopt Resolution Amending the Benefit Plan
FINANCIAL STATEMENT:
The proposed amendment to the City's retirement contract with
PERS will be effective July 1, 2000. The first year cost to fund the
increased benefit is $100,492.20 during Fiscal Year 2000-2001.
Sufficient funds will be included in the budget to cover these costs.
DESCRIPTION: Each year, the City Manager's Staff conducts a wage and benefit
survey of approximately 30 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 (PERS) at the 2% at 60, three-year average benefit level. During the market survey the City
discovered that 24 out of 30 agencies (80%) have an enhanced retirement benefit with PERS, specifically
funding the 2% at 55; single highest year (SHY) benefit.
BENEFIT ENHANCEMENT COSTS
There are two components of costs associated with this retirement benefit enhancement. First, is the
"make-up" cost required to bring the City's assets in PERS up to the level they would have been if the
City had been in the 2% ~ 55; SHY plan all along. If the City has any excess assets in PERS, those
assets are used first to pay for this cost. Any amount of the "make-up" cost not covered by excess assets
COPIES TO:
ITEM NO.
is .amortized over a 20-year funding horizon. The second component is simply the increase in normal,
annual costs required to fund the increased benefit level. This is paid annually by increased contribution
rates.
The actuary study for this PERS benefit enhancement was completed in December 1999. The City of
Dublin currently has excess assets in PERS of approximately $1,252,339. Currently, these excess assets
are being amortized and used to reduce the City's normal, annual contributions.
The City's normal cost rate for FY 2000/2001 is 5.742% but the City actually only pays 0.688% because
the excess assets (surplus) are used to reduce the City's costs. PERS rates would increase in order to fund
the new retirement benefit level by 3.681% based on existing payroll figures. The Fiscal Year 2000/2001
employer rate will be 4.369% (3.681 + .688) and sufficient funds will be included in the budget to cover
these costs.
Recently, the CalPERS Board adopted a Resolution providing a one-time increase in the actuarial value of
the assets from 90% to market value to 95% of market value for the calculation of the July 1, 2000
through June 30, 2001 employer rate. The "incentive" applies only to plans that amend their contract
between July 1, 1999 and June 30, 2001. The offset to Dublin due to this re-valuation is approximately
.821% or $22,413.55, which was included in the December 1999 valuation.
The changes in the City's accrued liability and unfunded accrued liability as of June 30, 1998 due to the
proposed plan amendment are shown in the table below:
Pre-Amendment Change Due To Plan Post-Amendment Post
Amendment & Method Method Change
Change
Accrued Liability $ 3,305,559 $ 571,706 $ 3,877,265
Assets 4,557,898 253,216 4,811,114
Unfunded Liability (1,252,339) 318,490 (933,849)
The immediate short-term change in the City's contribution rate due to the plan amendment is shown in
the table below:
Rate Component Pre-Amendment Change Due To Plan Post-Amendment Post
Amendment & Method Method Change
Change
Normal Cost 5.742 % 2.293 °A 8.035 %
Unfunded/Excess Asset Cost (5.054)% 1.388 % (3.666) %
Total Employer Rate 0.688 % 3.681% 4.369 %
Amortization Period Multiple Years 20 Years Multiple Years
ORDINANCE ADOPTION
The attached Ordinance amends the contract between the City Council of the City of Dublin and the
Board of Administration of the California Public Employees' Retirement System (PERS) to provide for
the 2% ~ 55; Single Highest Year benefit plan.
The Ordinance also provides for the noticing requirements pursuant to Government Code Section 38933.
This Ordinance was presented for introduction at the City Council Meeting of April 18, 2000.
The proposed amendment to the City's retirement contract with PERS will be effective July 1, 2000.
Sufficient funds will be included in the budget to cover these costs. The following outlines the sections of
the Benefit Plan where changes are proposed:
Section 7. Retirement - In accordance with the market survey and with the employees' request, it is
proposed that the Benefit Plan be amended to enhance the retirement to include 2% @ 55; single highest
year benefit~
The proposed amendments are shown in Attachment 2; all-remaining sections of this document would
remain in tact.
In summary, as the City's survey indicated, many cities have switched to the 2% ~ 55; SHY benefit plan
under PERS. Several indicated they changed to the plan in order to be competitive with other
jurisdictions for recruiting purposes. The City Manager has met with all regular employees to discuss the
proposed amendment to the PERS contract and Benefit Plan.
Staff recommends that the City Council open the Public Hearing, receive public testimony, close Public
Hearing, deliberate, waive reading, ADOPT the Ordinance, and adopt the Resolution amending the
Benefit Plan.
ORDINANCE NO. - 00
AN ORDINANCE OF THE CITY COUNCIL 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 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 which shall be effective July 1, 2000.
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 of the Government Code of the State of California
PASSED AND ADOPTED by the City Council of the City of Dublin on this 16t~ day of May,
2000, by the following votes:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
Mayor, City of Dublin
City Clerk, City of Dublin
Attachment 1
CalPERS
California
Public Employees' Retirement System
EXHIBIT
AMENDMENT TO CONTRACT
Between ~he
Board o£ Administration
California Public Employees' Redrernem System
and ~he
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 and November 21, 1987 which provides for participation of Public Agency in
said System, Board and Public Agency hereby agree as follows:
Paragraphs 1 through 10 are hereby stricken from said contract as executed
effective November 21, 1987, and hereby replaced by the following paragraphs
numbered 1 through 11 inclusive:
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.
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 "EXHIBIT 07'-.:_.
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:
ao
Employees other than local safety members (herein referred to as
local miscellaneous members).
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:
FIRE FIGHTERS; AND
POLICE OFFICERS.
The percentage of final co.mpensation to be provided for each year of
credited prior and current service as a local miscellaneous member shall
be determined in accordance with Section 21354 of said Retirement Law
(2% at age 55 Full).
Public Agency elected and elects to be subject to the following optional
provisions:
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).
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.
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.
Public Agency shall also contribute to said Retirement System as follows:
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.
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.
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.
10.
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.
11.
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 effect, j~n the day of ,
BOARD OF ADMINISTRATIO.N..,N~,~ CITY COUNCIL
PUBLIC EMPLOYEES' RETI~NT SYSTEM CITY OF DUBLIN
H W -- "~~ BY :_,.~.
~NNET . ~ON, CHIEF ' PRESIDING OFFICER ,,A~'
ACTUARI~~~ER SERVICES DIVISION
PUBLIC ~yEES RETIREMENT SYSTEM ~X~~xx
t 'ate
AMENDMENT
PERS-CON-702A (Rev. 8\96)
Clerk
RESOLUTION NO. - 00
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
AMENDING THE BENEFIT PLAN
WHEREAS, the Personnel System Rules require the City Council to adopt a Benefit Plan, and
WHEREAS, the Benefit Plan prescribes the current benefits provided to employees by the City.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin hereby
amends Resolution No. 101-91 and subsequent amendments to include the following:
Section 7. Retirement: The City will provide the California Public Employees Retirement System 2% at
age 55 (Section 21354 of the California Public Employees' Retirement System plan) and One-Year Final
Compensation (Section 20042 of the California Public Employees' Retirement System plan) to all eligible
employees, effective lUly 1, 2000. The City Council shall have the authority to amend the plan to include
benefit options offered by the Public Employees Retirement System.
PASSED, APPROVED AND ADOPTED this 16t~ day of May, 2000.
AYES:
NOES:
ABSENT:
ATTEST:
Mayor
City Clerk
K2/G/5 - 16 -00/reso-2at55. doc
ATTACHMENT 2