HomeMy WebLinkAboutItem 4.08 PERS Contract Amentor
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DATE:
TO:
FROM:
STAFF REPORT
CITY COUNCIL
September 18, 2012
Honorable Mayor and City Councilmembers
Joni Pattillo City Manager""'
CITY CLERK
File #720 -60
SUBJECT: Adoption of the Ordinance to Amend 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:
This is the second reading of an Ordinance introduced at the regularly scheduled City Council
Meeting of August 21, 2012. The Ordinance authorizes 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 CalPERS retirement costs and thus decreases the employer's
retirement program costs. Employee CalPERS 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:
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 waive the reading and adopt 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.
J
Submitted By
Human Resources Director
�?14
Reviewed By
Assistant City Manager
Page 1 of 3 ITEM NO. 4.8
DESCRIPTION:
Background
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).
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 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 Council certified compliance under Government Code Section 7507 by the adoption of
the Resolution of Intention on August 21, 2012 and introduction of the Ordinance. 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.
Additionally, Government Code Section 20474 requires a secret ballot election by employees
affected by the CalPERS contract amendment. On August 28, 2012 the City Manager held a
general employee meeting. During the employee meeting as secret ballot election was held
among the 74 employees present; 96% of the employees voted in favor of the CalPERS
contract amendment.
The Amendment to the City's Retirement Contract shall be authorized by the City Council upon
adopt of an Ordinance. The effective date of the Ordinance shall be October 18, 2012 and the
Page 2 of 3
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. 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.
2. Exhibit 4
Page 3 of 3
ORDINANCE NO. — 2012
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.
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 1
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