HomeMy WebLinkAboutStaff Report 1.C 10/06/2008 Additional1.0
Additional /Revised Information — Friday, October 3, 2008
October 6, 2008
1. NEW BUSINESS
C. Presentation and Discussion of Financial Impact Report on the City's Future Costs of
Offering the Two Years Additional Service Credit under PERS to Miscellaneous,
Police, and Fire Employees; and, Possible Direction to hold a Special Meeting of the
City Council to Consider a Resolution Implementing that Change. (Brown /Robbins)
Please see attached additional/revised information on this item.
City of Petaluma, California
Memorandum
OCT 0 2 2008
Human Resources, 11 English Street, Petaluma, CA 94952 �
(707) 778 -4340 Fax (707) 778 -4539 E- mail. humanresources (ici.yetalun:a.ea.us
DATE: October 2, 2008
TO: John Brown, City Manager
FROM: Pamala Robbins, Human Resources Manager
SUBJECT: Agenda Bill 1 C — Service Credit Financial Impact - Revision
Working with an actuary from Bartel Associates, LLC and Ca1PERS the City has refined
the data, calculations, and formulas for costing the two years additional service credit.
The attached revised Report reflects the final estimated numbers.
i
Attachment 1
City of Petaluma Financial Impact Report for Two Years Additional Service Credit
Two Years Additional Service Credit
Revision 1
There are ninety -one (91) employees eligible to retire and receive the two years additional service credit.
Eligible employees have at least five years of service credit in CalPERS and are age fifty (50) or older.
Attachment A provides a listing of all positions in the City with employees eligible for the service credit.
The added cost to the retirement fund if all eligible employees retire with the service credit is as follows:
Employee Group Safety Employees Miscellaneous Employees Total
# Employees Eligible 14 77 91
Present value of $1,456,457 $2,814,026 $4,270,483
of additional employer
contributions
$4,270,483 is the estimated present value of the additional employer contributions which will be
required in the future for providing the two years service credit if all 91 employees choose to retire
within the 90 -day window period.
The cost of the two years additional service credit will be included in the City's employer contribution rate
in the fiscal year starting two years after the end of the designated retirement period. That means the
cost would be in the City's employer rates in fiscal year 2011/12.
It is estimated that the employer rates would increase an additional amount as follows:
Safety Employees Miscellaneous Employees Total
Employer Rate Increase .90 % 1.38%
Estimated Cost
of Increased Rates $110,004 212,540 $322,544
Status of Retirement Program as of June 30, 2006 — CalPERS Actuarial Report
Safety Employees Miscellaneous Employees Total
Employer Rate 2008/09 28.30% 11.66%
Actuarial Value Assets 76,262,678 51,333,652 $127,596,330
Funded Status 85% 94.30%
Unfunded Liability 19,145,399 6,285,781 $ 25,431,180
Present Value of
Service Credit 1,456,457 2,814,026 $ 4,270,483
Revised Unfunded Liability
With Service Credit $ 20,601,856 $ 9,099,807 $ 29,701,663
This estimated present value of additional contribution may differ from the actual present value for two
reasons:
1. Some of the employees who are eligible to retire and receive the two years service credit (and
who are included in the preceding estimate) may choose not to retire; and,
2. There may be additional cost to the City (called an experience loss) if the total number of
employees retiring in the fiscal year exceeds the number predicted by the actuarial assumptions.
An experience loss occurs very often when the two years service credit is offered because some
employees retire who would have otherwise waited until later years.
The City informally surveyed all ninety -one (91) eligible employees and asked who would be seriously
interested in the taking the service credit and retire.
Twenty -nine (29) eligible employees that said they would be seriously interested in taking the
service credit and retiring. Attachment B provides a listing of the number of employees by City
Department who expressed interest the service credit and retirement.
The added cost to the retirement fund if only those who expressed interest retire with the service credit is
as follows:
Employee Group Safety Employees Miscellaneous Employees Total
# Employees Interested 8 21 29
Present Value $ 811,881 $ 796,870 $ 1,608,751
$1,608,751 is the estimated present value of the additional employer contributions for interested
employees only that will be required in the future for providing the two years service credit.
The cost of the two years additional service credit will be included in the City's employer contribution rate
in the fiscal year starting two years after the end of the designated retirement period. That means the
cost would be in the City's employer rates in fiscal year 2011/12. The increase in the employer
contribution rate may continue for as long as 20 years.
It is estimated that the employer rates would increase an additional amount as follows:
Safety Employees Miscellaneous Employees Total
Rate Increase .50% .39%
Estimated Cost
of Increased Rates $ 61,320 $60,187 $ 121,507
Status of Retirement Program as of June 30, 2006 — CalPERS Actuarial Report
Safety Employees
Miscellaneous Employees
Total
Employer Rate 2008/09
28.30%
11.66%
Actuarial Value Assets
76,262,678
51,333,652
$127,596,330
Funded Status
85%
94.30%
Unfunded Liability
19,145,399
6,285,781
$ 25,431,180
Present Value of
Service Credit
811,881
796,870
1,608,751
Revised Unfunded Liability
With Service Credit
$ 19,957,280
$ 7,082,651
$ 27,039,931
If the City offers the two years additional service credit and all 91 employees eligible to retire do retire the
City would save the following estimated amount if positions remain vacant for one year and they are not
staffed. Note: the amount below is an annual amount. It is likely the savings for the current fiscal year
would only be about half or 6 months. The majority of those eligible are not expected to retire during the
90 -day window period.
Employee Group
# of
Annual Salary & Other
Benefit and Other
Total Annual
$ 138,162
Employees
Compensation
Payroll costs
Cost of
29
$ 348,569
Reported to CalPERS
associated with
Employee
employment
Group
Safety
14
1,729,289
773,256
2,502,545
Miscellaneous
77
5,618,946
1,744,305
7,363,251
Total
91
$ 7,348,235
$ 2,517,562
$ 9,865,797
If all of the 29 employees interested in retiring do retire the City would save the following estimated
amount if positions remain vacant for one year and they are not staffed. Note: the amount below is an
annual amount. It is likely the savings for the current fiscal year would only be about half or 6 months. It
is unknown who would actually retire.
Employee Group
# of
Annual Salary & Other
Benefit and Other
Total Annual
$ 138,162
Employees
Compensation
Payroll costs
Cost of
29
$ 348,569
Reported to CalPERS
associated with
Employee
employment
Group
Safety
8
973,558
435,229
1,408,787
Miscellaneous
21
1,519,877
479,636
1,999,513
Total
29
2,493,435
914,865
3,408,300
If all 29 employees retire the City would have to make a cash payout of employee leaves as follows:
Employee Group
# of
Employees
Cost of Leave Payouts
Safety
8
$ 138,162
Miscellaneous
21
$ 210,407
Total
29
$ 348,569
If all 29 employees either opt for retiree health benefit and or receive the 20 -year cash retiree benefit the
City will incur an additional annual cost of $38,112.
All costs and savings are estimates only and based upon current known data. Actual costs and savings
will depended on actual data.
The City's annual valuation report for the fiscal year that begins two years after the end of the designated
period will show the amount of the increase in the employer contribution rate resulting from the two years
service credit.
The City can pay off the cost of the two years service credit at anytime.
An employee cannot receive unemployment insurance payments during the window period.
An employee may not retire the first day of the window period. If the retired employee subsequently
reenters membership, the additional service credit is forfeited.
To implement the two years additional service credit the City Council must:
1. Have a CalPERS contract amendment in effect that provides for the two years additional service
credit.
2. Designate a window period of not less than 90 or more than 180 days in length within which
employees must retire.
3. Designate position(s) by job classification, department, or other organizational unit eligible for the
service credit.
4. Certify that it is electing to be subject to the provisions of the service credit due to mandatory
transfers, layoffs and /or demotions that constitute at least one percent of the job classifications,
department, or organizational unit. The City has already met this requirement with the layoffs in
the Community Development Department.
5. Certify that the City intends to leave at least one vacancy in any position in any department or
organizational unit unfilled.
6. Certify that the City has complied with the provisions of Government Code Section 7507 and
disclosed the additional employer contributions and the funding of those employer contributions,
at a public meeting.
Attachments
A — Listing of All Employees Eligible
B — Listing of the Number of Employees Interested by Department