HomeMy WebLinkAboutStaff Report 1.B 12/6/2012 Agenda/ Itww#1' :3
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DATE: December 6,--2012
TO: Honorable Mayor and Members of the City Council through the City Manager
FROM: Pamala;Stephens, Human Resources Manager
SUBJECT: Resolution,of Intention to Approve an Amendment to°the Contract Between the
Board,of Administration California Public Employees' Retirement System and
the,City Council City of Petaluma.
RECOMMENDATION
It is recommended.'that the City Council Adopt the Resolution of Intention to Approve an
Amendment to Contract Between the Board' of Administration California Public Employees'
Retirement System and the'City Council City of Petaluma fora.,second tier of retirement benefits
that provide the 2% at60 full formula.and the three-year'final average compensation to City of
Petaluma local miscellaneous :members entering membership after the effective date of the
amendment-to the contract.
BACKGROUND
On July 2, 201.2 the City Council approved a°MOU for employees 'of'Unit 6 (Police). On July
16, 2012 •the City Council 'approved a MOU for employees of Unit 10 (Public Safety Mid-
Managers). pp ^Fire) on July 16, 2012. All of
The Cit y Council approved a MOU with Unit 7
these ratified MOU's for 'safety units included provisions for a second tier of PERS, and in
October the contract with CaIPERS was amended to iereate a second tier of retirement benefits
for employees in safety units for the 3% at 55 full formula and three, year final average
coinpenSation..
OR August 6, '2012 they City Council approved a Compensation:Plan for employees of Unit 8
(Departntent-Directors). On September 1'0, 2012 the City Council approved MOU's between the
Petaluma Professional and Mid-Managers Association for Employees of Unit 4 (Professional),
Unit 9 (Mid-Managers),and Unit 11 (Confidential): In an.action taken this evening, the City
Council ratified a MOU covering employees of Unit 1 (Confidential), Unit 2 (Maintenance) and
Unit°3'(Clerical and Technical).
The City Council's Goals and Priorities for 2012-2043 include implementation of a second tier
of PERS retirement. The recommended action is approval of the Resolution of Intention to
amend the contract with CaIPERS covering the miscellaneous units that were not subject to the
Agenda Review)
City Attorney Finance Director City.Manager
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prior contract amendnient`that;covered safety employees. (All Units that include miscellaneous
employees now have ratified agreements, and all include a provision for a second tier of
retirement for the.2%o at 60 formula and the three-year final average compensation. Therefore,
the-City`.may proceed toramend its contract with CaIPERS for a lower retirement benefit.
DISCUSSION
The City of Petaluma intended, following agreement with miscellaneous bargaining units, to
amend its contract with CaIPERS for a second tier of retirement benefits for miscellaneous
• members. To implement the contract amendment for the.second tier of retirement benefits for
miscellaneous employees the City must complete the amendment process prior to December 31,
2012. Pension reform legislation, known as the California Public Employees' Pension Act of
2013, will be in effect on January 1, 2013. The City of Petaluma contracts with CaIPERS for
retirement benefits and there fore elements of,the Pension Reform Act will apply to the City of
Petaluma. Once pension reform becomes effective, CaIPERS will not permit contract
amendments for lower retirement formulas.
The process required,by CaIPERS for a contract amendment includes approval of the Resolution
of Intention to amend the contract, and adoption of an Ordinance amending the contract.
Following approval of the Resolution of Intention, there is a mandatory 20 day period before the
ordinance can be approved, It appears that December 27, 2012 is the earliest, and for all
practical purposes, the last.date that a contract amendment can be made effective under the
CaIPERS contract,amendtnantpiocass.
If the City amends its contract with CaIPERS for second tier retirement, miscellaneous
employees that are a new hire, but not a new member to Ca1PERS, would fall under the second
tier retirement formula which would be 2% at 60 and three-year final compensation. If the City
did not proceed with the contract amendment for the second tier of retirement benefits, it is the
City's understanding that a new hire,,who is not a new'member to CaIPERS, would fall under the
current retirement formulawhich-is 2% at 55, one-year final compensation.
Assuming Council approves the' Resolution of Intention, adoption of an urgency ordinance
would then be recommended_to occur at a special meeting of the Council on December 27, 2012,.
This allows the City to meet,the statutory requirement that the adoption of the ordinance take
place at least 20 days after adoption of the Resolution of Intention. As well, the,effective date of
the urgency ordinance '.would be inimediate, and the effective date of the.'C_aIPERS contract
amendment would be the 'day following the effective date of'the ordinance, which would be
December 28, 2012.
The contract amendment creates a second tier of retirement benefits that provides:the 2% @ 60
full formula and the three-year 'final average compensation to employees entering the
miscellaneous classification on or after December 28, 2012, who are not:otherwisse placed into
the retirement beriefitestablished by the State's pension reform.
FINANCIAL IMPACTS
Government Code Section 7507 regtiies that the future annual costs as determined by the
CaIPERS Actuary for the change in retirement benefits be made public at a public meeting at
least two weeks prior to the.adoption of the Ordinance. In compliance with Government Code
Section 7507, attached to this report-•'(Attachment 2) is the Actuary-Report-for the Miscellaneous
Plan.
There will be no .immediate savings to the City when the, second-tier contract amendment is
implemented. Ultimately, it is expected that City costs will decrease as the mix of first tier
employees decreases and second tier employees increase, When the mix of all first and second
tier employees reaches a 50-50 ratio, it is estimated by CaIPERS that the employer contribution
rate will decrease by 1.7%. In current dollars`a decrease of 1.7% would reduce the City's annual
employer contribution for miscellaneous employees by.$203,330.
ATTACHMENTS
1. Resolution of Intention to'Approve an Amendment to Contract with CaIPERS
2. CaIPERS Employer Contribution Rate Information — Miscellaneous Plan dated
December 20, 2011
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Attachment 1
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RESOLUTION OF INTENTION
TO APPROVE AN AMENDMENT TO CONTRACT
BETWEEN.THE
BOARD OF ADMINISTRATION
CALIFORNIAPUBLIC EMPLOYEES"RETIREMENT,SYSTEM
AND THE
CITY COUNCIL
CITY OF PETALUMA
WHEREAS, the Public Employees' Retirement Law perrhits, 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
amendmentsto-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.surrirnary of the change proposed in said contract;and
WHEREAS, the following is a statement of the proposed change:
To provide.Section 20475 (Different Levelof:Benefits).
Section 21353 (2°/0 @ 60.Full formula)and Section 20037
(Three=Year Final Compensation) are applicable;to local
miscellaneous remembers entering°membership°for the first
time in-the m scellaneous classification after the effective
date of this amendment to contract.
NOW, THEREFORE, BE IT RESOLVED that the governing body of the above agency
does hereby give notice of intention to approve: an amendment to the
contract between said;public agency and the Board of Administration of the
Public Employees' Retirement System, a copy of said amendment being
attached hereto, as an "Exhibit!' and by this reference made.a part hereof.
By:
Presiding:Officer'
Title
Date adopted';and'approved
,(Amendment).
CON-302(Rev 4/96)
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CalPERS
EXHIBIT
California
Public Employees'"Retirement;System
AMENDMENT TO CONTRACT
Between the
Board of Admini§tration
California Public Employees'- Retirement System
and the
City Council
City of Petaluma
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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
January 1, 1950, and witnessed October 18, 1949„and as amended effective August 1,
1959, November 1, 1959,'March 1, 1965, June 1, 1965, April'.1, 1969, January 1, 1974,
November 1, 1980, November 1, 1981, July 1, 1982, January 1, 1987, December 28,
1987, January 1, 1992, January 4, 1996, ,June 30, 1996; May 4, 1998, April 5, 1999,
June 30, 2001, January 16, 2003, October 7, 2008 and November 15, 2012 which
provides for participation of Public Agency in said System, Board and Public Agency
hereby agree as follows:
A. Paragraphs '1 through 14 are hereby stricken from said contract as executed
effective November 15, 2012, and-hereby replaced by the following paragraphs
numbered 1.. through 15 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, entering membership in
the miscellaneous classification on or prior to the effective date of this
amendment to contract and age 60 for local miscellaneous members
entering' membership for the first time in the miscellaneous classification
after the effective date of this amendment'to contract; age 50 for local
safety members, entering membership in the safety classification on or
prior to November 15, 2012 and age 55 for local safety men1bers'entering
membership for the first time in the safety classification after November
15' 2012.'
2. Public Agency shall participate in, the Public Employees' Retirement
System from and .after January 1, 1950 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 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
tl ea`retirernent benefits, provisions or formulas provided under
the Public Agency's prior non-CaIPERS,retffernentprogram.
(b) Public,Agencys 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 agreementiwith a third,party other than
CaIPERSto provide retirement benefits, provisions, or formulas
that are different than the retirement benefits, provisions or
formalasprevided 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 1:.1 of the United States
Bankruptcy Code and/or Public Agency's election to rejectthis
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 fermination,of this Contract either by request.of
Public Agency or involuntarily pursuant to the Public Employees'
Retirement Law.
(g) Changes sponsored byPublic 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 ofsaid Retirement System except such.ineach such class as
are excluded bylaw or this agreement:
a. Local:Fire Fighters (herein referred to as local safety members);
b. Local Police Officers (Herein referred;to as;local•safety members);
c. 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 the following classes of employees shall not become
members of Retirement System:
NO ADDITIONAL EXCLUSIONS
6. The percentage of final compensation to be provided for each year of
credited prior and current service as a local. miscellaneous member
entering membership in the miscellaneous classification on or prior to the
effective date of this amendment to contract shall be determined in
accord ance 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 current service as a local miscellaneous member entering
membership for the first time in the miscellaneous.classification after the
effective .date of this amendment, to contract shall be determined in
accordance with Section 21353 of said Retirement Law (2% at age 60
Full).
8. The percentage of final compensation to be provided for each year of
credited prior 'and current service as a local safety member entering
membership in the safety classification on or prior to November 15 2012
shall be determined in accordance with Section 21362.2 of said
Retirement`Law'(3% at age 50 Full).
9. The percentage of final compensation to be provided for each year of
credited current service as a local safety member entering-membership for
the first time in the safety classification after November 15, 2012 shall be
determined in accordance with Section 21363..1 of said Retirement Law
(3% at age 55 Full).
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10. Public Agency`elected and elects to be subject to the following optional
provisions:
a. Section..21222.1 (One-Time 5% Increase - 1970). Legislation
repealed:said Section effective January 1, 1980.
b. Section '20042 (One-Year Final Compensation) for local safety
members entering membership on or prior to November 15, 2012
and local miscellaneous members entering membership on or prior
to the effective date of'this amendment totontract.
c. Section 20965'(Creditfor Unused Sick,Leave).
d. Section :21326 (One;-Time 1% to 7% Increase For Local
Miscellaneous Members:Who Retired or Died Prior to July 1, 1974).
Legislation.repealed said Section effective January 1, 2002.
e. Sections .21624, 21626 and 21628 (Post-Retirement Survivor
Allowance)for local fire members only.
f. Section 21024 (Military Service Credit as Public Service).
g. Section 21574 (Fourth Level of 1959 Survivor Benefits) for local
Safety members only.
h. Section 21573 (Third Level of 1959 Survivor Benefits) for local
miscellaneous members.on'ly.
i. Section 20434. ("Local Fire Fighter" shall include any officer or
employee of a fire department^employed'to•perform firefighting, fire
prevention, fire ;training, hazardous materials, emergency medical
services, or fire or arson investigation services as described in
Government Code Section 20434).
j. Section 20903 (Two Years Additional Service Credit).
k: ,Section 20475 (Different.Level of Benefits). Section;21363.1 (3%
@: 55 Full formula) and. Section 20037 (Three-Year Final
Compensation) are applicable to local safety members entering
membership for the first time in the safety classification after
'November 15, 2012.
Section 21353 (2% @•60 Full formula) and Section 20037(Three-
! Year Final Compensation) are applicable to local miscellaneous
members entering membership for the first dime in the
• miscellaneous classification iafter the effective date of this
amendment to contract.
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11. Public 'Agency, ii accordance with Government Code Section 20790,
ceased to be an "employer"'for purposes of Section 20834 effective on
November 1„ 1980. Accumulated contributions of Public Agency shall be
fixed and determined as provided in Government Code Section 20834,
and accumulated contributions thereafter shall be held by the Board as
provided in Government Code Section 20834.
12. Public Agency shall contribute to said Retirement System the contributions
determined:6y actuarial valuations of prior and future service liability with
respect•to local miscellaneous members and local safety members of said
Retirement System.
13. Public Agency shall also contribute to,said RetiremehtSystem as follows:
a. Contributions required per covered member on account of the 1959
Survivor Benefits provided under Section 21.573 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. Contributions required percovered,member on accountof'the 1959
Survivor Benefits provided under Section 21574 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 safety members.
c. A reasonable amount, as fixed by the Board, payable in one
installmentwithin 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
penodicirivestigation and valuations required by law.
d. 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 bylaw.
14. 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.
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15. Contributions required of Public Agency and its employees shall be paid
by Public 'Agency to the Retiremert0System 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 icontributions required of any:employee may be made by direct
payments between the employee and the Board.
B. This amendmentshall be effective on the day of
BOARD OF ADMINISTRATION CITY COUNCIL
PUBLIC EMPLOYEES' RETIREMENT SYSTEM CITY OF PETALUMA
BY BY
KAREN DE FRANK, CHIEF PRESIDING OFFICER
CUSTOMER ACCOUNT SERVICES.DIVISION
PUBLIC EMPLOYEES'!'RETIREMENT`SYSTEM
Witness`Date
Attest:
Clerk
AMENDMENT GRIPERS'ID#5476407298
PERS=CON-702K....
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Attachment 2
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• California,PublicEmployees'.Retirement.System
Actuarial Office
P.O. Box 942709
Att‘S I 1. Sacramento CA 95812-1494
TTY: (877)249-7442
CAPERS (888)225 7377 phone• (916) 795-2744 fax
wwW,calpersica:gov
December.,20,201.1
CALPERS.ID. 5476407298..
Employer Name: CrrY.OF parALUMA
Rate Plan: MISCELLANEOUS.PLAN
Re:.New.2%@60,Three-Year Final Compensation Second Tier within a Non-pooled.Plan(Section:20475: Different
Level.of Benefits Provided for New Employees)
Dear Requestor:
As requested,employepcontribution rate information on:your proposed second tier follows.
If you are aware of others interested in this information(i.e.payroll staff;county court employees,
port districts,etc.),pleaseinform them.
The'information.is based on the,most recent'annual valuation and is good.untl the completion of the next annual
valuation, that is the annual valuation•as of June 30, 2611. If your agency has not taken.action;to amend its
contract and we have already completed the June30, 2011 annual"valuation report,you'must contact.the
Retirement Contract Seeiices.Unit for an updated'cost analysis.
If the employee contribution rate changes,that change;would take place immediately. There will be no
immediate employer contr,tiubon rate impact from this amendment .Ultimately;though,(your. normal cost
will decrease. If the mix of active member entry ages were.the same forboth:the current continuing first tier
employees and the new second.tier employees,-the.decrease in theremployer rate would be 1.7%.
The employer rate reduction will occur gradually,;beginning on•July 1, 2014, if,there are second,tier employees hired
on or before June 30,;2012. For fiscal years 2014/2015,and beyond,,the-..projected annual amount of rate reduction
you can expect from introducing a second tier is approximately equal to the ratio of your second tier annual payroll
to your total plan annual payroll two and a half years earlier. For example if 1/10 of your Miscellaneous Plan
members were in second tier on June 30, .2012 and the ultimate expected normal cost decrease was 1.7%, the
cumulative rate reductionyou can expect bythe 2014/2015 fiscal year would be 1/10'x 17%= 0.17%.
To initiate an amendment to thetcontract, please follow the Contract Amendment'Request process on MyCaIPERS
with our Retirement Contract Services Unit 'indicating your wish to contract for Section"20475 (Different Level of
Benefits)and identifying the groUp(s)tO which the benefit reduction applies.
In sections 20463 (b) and (c), the California Public Employees' Retirement'Law.requires the governing body of a
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public agency within rive days of receipt of the contract amendment:cost analysis, to provide.each employee
organization with a copy of, analysis. If this cost analysis was requested by'ari employee.organization, the
employee organization is::also.required.within five days of receipt of the analysis, to providea copy of-the analysis to
the public ag"ency.
If you have questions,.please cal f(888)CaIPERS (225-7377).
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BARBARA J..WARE, FSA,MAAA
Enrolled Actuary
Senior Pension Actuary,CaIPERS
California Public Employee's Retirement System
www.calpers.ca.gov k\