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HomeMy WebLinkAbout07-17-2012 ph1 dreading pers benefit fire safety ordinancecounci lagenOa Repolt C I T Y O F S A N L U I S O B I S P O FROM : Monica Irons, Human Resources Directo r Prepared By :Greg Zocher, Human Resources Manage r SUBJECT :SECOND READING OF ORDINANCE NO . 1582 AUTHORIZING A N AMENDMENT TO THE CONTRACT BETWEEN THE CITY OF SAN LUI S OBISPO AND THE BOARD OF ADMINISTRATION OF THE CALIFORNI A PUBLIC EMPLOYEES' RETIREMENT SYSTEM TO PROVIDE SECTIO N 20475 (DIFFERENT LEVEL OF BENEFITS), SECTION 21363 .1(3%o @ 5 5 FULL FORMULA) AND SECTION 20037 (THREE-YEAR FINA L COMPENSATION) FOR LOCAL FIRE SAFETY MEMBERS . RECOMMENDATIO N Adopt Ordinance No . 1582 authorizing an amendment to the contract between the City Council o f the City of San Luis Obispo and the Board of Administration of the California Public Employees ' Retirement System (Ca1PERS). DISCUSSION Background On June 19, 2012 City Council adopted a Resolution of Intention (Resolution No . 10373) approvin g an amendment to the contract between the Board of Administration of the California Publi c Employees' Retirement System and the City of San Luis Obispo . City Council also introduce d Ordinance No . 1582 authorizing an amendment to the contract between the City of San Luis Obisp o and the Board of Administration of the California Public Employees' Retirement System regardin g Section 20475 (Different Level of Benefits), Section 21363 .1 (3% @ 55 Full Formula)and Sectio n 20037 (Three-Year Final Compensation) for local Fire Safety Members (Attachment 1). More than 20 days have passed since the Resolution of Intention was adopted and Ordinance No . 1582 was introduced and approved by Council on June 19, 2012, in accordance with Government Cod e Section 20471 . This constitutes the second reading of the ordinance amending the current contrac t and extending the aforementioned benefits to all Fire Safety Members hired after th e implementation of this contract amendment . Upon adoption by Council, the contract with CaIPER S will be amended and the second tier pension benefit will go into effect at the start of the first ful l pay period following thirty days from adoption (August 30, 2012). FISCAL IMPAC T According to Ca1PERS (Attachment 2), the 2012-2013 employer contribution rate will be 21 .802 % of reportable earnings for local fire safety members entering membership for the first time in th e fire classification after the effective date of this amendment to contract . Furthermore, whe n comparing the first tier rate of 39 .910% to the new lower level second tier rate, the City's contribution will decrease significantly. Actuarial analysis estimates retirement costs will b e reduced by approximately $161,000 annually by the eleventh year for employees hired under th e PH1-1 Meeting Date 7117/1 2 Item Number PH1 Resolution of Intention - Fire Safety Second Tier Retirement Page 2 second tier Fire Safety benefit . There will be no change to the member contribution rate of nin e percent and new employees will pay the full nine percent to Ca1PERS . ALTERNATIVE S Do not adopt the ordinance.This alternative is not recommended since this change was approved a s part of the 2012-2015 Local 3523 MOA and the Battalion Chiefs' Letter of Agreement . Failure to adopt this ordinance would place the City in violation of its agreement with Local 3523 and would no t result in the anticipated savings described above . ATTACHMENT S 1.Ordinance No . 158 2 1 .1 Contract Amendment Exhibi t 2.CaIPERS Actuarial Analysi s .:.d £* i!j rcroi Imo,.:Y~-1 .report lire o is L oo.uocx PH1-2 ATTACHMENT 1 ORDINANCE NO . 1582 (2012 Series ) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISP O AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CIT Y COUNCIL OF THE CITY OF SAN LUIS OBISPO AND THE BOARD O F ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES'RETIREMENT SYSTE M WHEREAS,the City of San Luis Obispo has contracted with the California Publi c Employees' Retirement System (Ca1PERS) for retirement benefits for its sworn Fire Safet y employees since July 1, 1952 ; an d WHEREAS,over the years, the City has amended its retirement benefit structure t o reflect changes as negotiated during the meet-and-confer process with each bargaining group ; and WHEREAS,the City is amending its contract with Ca1PERS to provide for the 3%@ 55 Retirement Formula and three year average final compensation for its sworn Fire Safet y employees hired after this contract amendment with Ca1PERS ; and WHEREAS,the City is amending its contract with Ca1PERS to provide that, pursuant t o Government Code Section 20471, there must be at least a 20-day period between the adoption o f the Resolution of Intention and the adoption of the final Ordinance . NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Lui s Obispo as follows : SECTION 1 .That an amendment to the contract between the City Council of the City o f San Luis Obispo and the Board of Administration, California Public Employees' Retiremen t System is hereby authorized, a copy of said amendment being attached hereto, marked Exhibit , and by such reference made a part hereof as though herein set out in full . SECTION 2 . The Mayor of the City of San Luis Obispo is hereby authorized , empowered, and directed to execute said amendment for and on behalf of said Agency . SECTION 3 .A summary of this ordinance, together with the names of Counci l members voting for and against, shall be published at least five (5) days prior to its final passage , in The Tribune, a newspaper published and circulated in this City . This ordinance shall go int o effect at the expiration of thirty (30) days after its final passage . O 158 2 PH1-3 Ordinance No . 1582 (2012 Series) Page 2 INTRODUCED at a regular meeting of the City Council held on this 19 th day of June , 2012,AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the 17 th day of July 2012, on the following vote : AYES : NOES : ABSENT : Mayor Jan Marx ATTEST : Sheryll Schroede r Interim City Cler k APPROVED AS TO FORM : J Christine Dietrick . J . Christine Dietric k City Attorney ATTACHMENT 1 .1 Att.,CaIPERS EXHIBI T Californi a Public Employees' Retirement Syste m AMENDMENT TO CONTRAC T Between th e Board of Administration California Public Employees' Retirement System and the City Counci l City of San Luis Obisp o 40- 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 July 1 , 1952, and witnessed June 9, 1952, and as amended effective October 1, 1962, Octobe r3, 1963, October 1, 1974, June 1,1976, December 1, 1976,December 20, 1978, January 16, 1980, May 1, 1980, July 1, 1980, July 1, 1983, July 1, 1986, July 23, 1987 , November 16, 1989, August 8, 1993, November 5, 1999, January 7, 2000,July 6, 2000 , September 21, 2001 March 28, 2002, July 18, 2002, January 30, 2003, February 27 , 2003, July 14, 2005 and December 29, 2005 .which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows : A . Paragraphs 1 through 13 are hereby stricken from said contract as execute d effective December 29, 2005,and hereby replaced by the following paragraph s numbered 1 through 15 inclusive : 1 . All words and terms used herein which are defined in the Publi c Employees'Retirement Law shall have the meaning as defined therein unless otherwise specifically provided . "Normal retirement age"shal l mean age 55 for local miscellaneous members, age 50 for local polic e members and for those local fire members entering membership in the fir e classification on or prior to the effective date of this amendment to contrac t and age 55 for local fire members entering membership for the first time i n the fire classification after the effective date of this amendment to contract . ATTACHMENT 1 .1 2 . Public Agency shall participate in the Public Employees' Retiremen t System from and after July 1, 1952 making its employees as hereinafte r provided, members of said System subject to all provisions of the Publi c Employees' Retirement Law except such as apply only on election of a contracting agency and are not provided for herein and to all amendment s to said Law hereafter enacted except those, which by express provision s thereof, apply only on the election of a contracting agency . Public Agency agrees to indemnify, defend and hold harmless th e California Public Employees' Retirement System (CaIPERS) and it s 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 an d costs, including but not limited to interest, penalties and attorneys fee s 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 tha n the retirement benefits, provisions or formulas provided unde r the Public Agency's prior non-CaIPERS retirement program . (b)Public Agency's election to amend this Contract to provid e retirement benefits, provisions or formulas that are different tha n existing retirement benefits, provisions or formulas . (c) Public Agency's agreement with a third party other tha n CaIPERS to provide retirement benefits, provisions, or formula s that are different than the retirement benefits, provisions o r formulas provided under this Contract and provided for unde r 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 State s Bankruptcy Code and/or Public Agency's election to reject thi s Contract with the CaIPERS Board of Administration pursuant t o section 365, of Title 11, of the United States Bankruptcy Cod e or any similar provision of law . Public Agency's election to assign this Contract without the prio r written consent of the CaIPERS' Board of Administration . The termination of this Contract either voluntarily by request o f Public Agency or involuntarily pursuant to the Public Employees ' Retirement Law . (g) Changes sponsored by Public Agency in existing retiremen t benefits, provisions or formulas made as a result o f amendments, additions or deletions to California statute or t o the California Constitution . (e) (f) PH1-6 ATTACHMENT 1 .1 4 .Employees of Public Agency in the following classes shall becom e members of said Retirement System except such in each such class a s are excluded by law or this agreement : 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). In addition to the classes of employees excluded from membership by said Retirement Law, the following classes of employees shall not becom e members of said Retirement System : a .CROSSING GUARDS . The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member i n employment before and not on or after January 30, 2003 shall be determined in accordance with Section 21354 of said Retirement La w (2% at age 55 Full). 7 . The percentage of final compensation to be provided for each year o f credited prior and current service as a local miscellaneous member i n employment on or after January 30, 2003 shall be determined i n accordance with Section 21354 .5 of said Retirement Law (2 .7% at age 5 5 Full). The percentage of final compensation to be provided for each year o f credited prior and current service as a local police member and for thos e local fire members entering membership in the fire classification on o r prior to the effective date of this amendment to contract shall b e 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 o f credited current service as a local fire member entering membership fo r the first time in the fire classification after the effective date of this amendment to contract shall be determined in accordance with Sectio n 21363 .1 of said Retirement Law (3%at age 55 Full). 10.Public Agency elected and elects to be subject to the following optiona l provisions : a.Section 21573 (Third Level of 1959 Survivor Benefits) for local fir e members only . b.Section 21574 (Fourth Level of 1959 Survivor Benefits) for loca l miscellaneous members and local police members only. PH1-7 ATTACHMENT 1 .1 c.Sections 21624, 21626 and 21628 (Post-Retirement Survivo r Allowance) for local safety members only . Section 20965 (Credit for Unused Sick Leave). e . Section 20042 (One-Year Final Compensation) for loca l miscellaneous members, local police members and for those loca l fire members entering membership on or prior to the effective dat e of this amendment to contract . Section 20903 (Two Years Additional Service Credit) for loca l miscellaneous members only . Section 21024 (Military Service Credit as Public Service). h.Section 21548 (Pre-Retirement Option 2W Death Benefit). i.Section 20475 (Different Level of Benefits). Section 21363 .1 (3% @ 55 Full formula) and Section 20037 (Three-Year Fina l Compensation) are applicable to local fire members enterin g membership for the first time in the fire classification after th e effective date of this amendment to contract . 11.Public Agency, in accordance with Government Code Section 20790 , ceased to be an "employer" for purposes of Section 20834 effective o n June 1, 1976 . Accumulated contributions of Public Agency shall be fixe d and determined as provided in Government Code Section 20834, an d accumulated contributions thereafter shall be held by the Board a s provided in Government Code Section 20834 . 12.Public Agency shall contribute to said Retirement System the contribution s determined by actuarial valuations of prior and future service liability wit h respect to local miscellaneous members and local safety members of sai d Retirement System . 13 :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 Retiremen t Law. (Subject to annual change .) In addition, all assets an d liabilities of Public Agency and its employees shall be pooled in a single account, based on term insurance rates, for survivors of al l local fire members . b.Contributions required per covered member on account of the 195 9 Survivor Benefits provided under Section 21574 of said Retiremen t Law . (Subject to annual change .) In addition, all assets an d liabilities of Public Agency and its employees shall be pooled in a single account, based on term insurance rates, for survivors of al l local police members and local miscellaneous members . PH1-8 ATTACHMENT 1 .1 c.A reasonable amount, as fixed by the Board, payable in on e installment within 60 days of date of contract to cover the costs o f administering said System as it affects the employees of Publi c Agency, not including the costs of special valuations or of th e periodic investigation and valuations required bylaw . d.A reasonable amount, as fixed by the Board, payable in on e installment as the occasions arise, to cover the costs of specia l valuations on account of employees of Public Agency, and costs o f the periodic investigation and valuations required by law . 14.Contributions required of Public Agency and its employees shall b e subject to adjustment by Board on account of amendments to the Publi c Employees' Retirement Law, and on account of the experience under th e Retirement System as determined by the periodic investigation an d valuation required by said Retirement Law . 15.Contributions required of Public Agency and its employees shall be pai d by Public Agency to the Retirement System within fifteen days after th e end of the period to which said contributions refer or as may be prescribe d by Board regulation . If more or less than the correct amount o f contributions is paid for any period, proper adjustment shall be made i n connection with subsequent remittances . Adjustments on account o f 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 COUNCI L PUBLIC EMPLOYEES' RETIREMENT SYSTEM CITY OF SAN LUIS OBISP O BY KAREN-DE FRANK, CHIE F CUSTOMER ACCOUNT SERVICES DIVISION PUBLIC EMPLOYEES' RETIREMENT SYSTEM Witness Dat e Attest : Cler k AMENDMENT CaIPERS ID #757462851 5 PERS-CON-702A BY PRESIDING OFFICER PHI-9 ATTACHMENT 2 California Public Employees' Retirement Syste m Actuarial Offic e P .O. Box 94270 9 Sacramento, CA 94229-270 9 TTY: (916) 795-324 0 (888) 225-7377 phone • (916) 795-2744 fa x www .calpers .ca .go v February 14, 201 2 CALPERS ID : 757462851 5 Employer Name : CITY OF SAN LUIS OBISP O Rate Plan : SAFETY PLAN (Fire or Police Employees ) Re : New Second Tier Plan (Section 20475 : Different Level of Benefits Provided for New Employees ; Section 21363 .1 3% @ 55 Full Formula with Section 20037 Three-Year Final Compensation ) Dear Requester . In the tables below, we show your 2011-2012 and 2012-2013 employer contribution rates before and after opening a second tier . Of the rate components shown below, the first two are specific to the pool to which the plan belongs and others ar e specific to your agency. However, the Phase out of Normal Cost Difference will normally be 0% beginning with rate s established for 2011-2012,so it has no impact from that time on . The Side Fund will continue to be paid off by the first tier plan since all the past service on which it is based belongs t o those current members who will continue in the first tier . The scheduled dollar amounts payable will continue a s before . However, because newly hired members will be covered by the second tier, the number of members an d payroll in the first tier will (after several years) gradually decline . The Amortization of Side Fund rate component is th e dollars needed to pay off the side fund divided by the payroll . So as long as the Side Fund remains,the first tier rate will increase as its payroll decreases .The first tier side fund is scheduled to be paid off after 24 years from Jun e 30, 2012 . Therefore, in determining the employer contributions savings, Amortization of Side Fund should be excluded. For you r agency, the ultimate annual employer savings equals the difference between the Normal Cost and Surcharges rate s times the second tier payroll . For 2011-2012 the Normal Cost and Surcharges percentage savings i s (17.164%+2.730%) (15,725%+1 .754%) = 2.415%.Based on the 2009 valuation, the ultimate employe r annual dollar savings would then be 2 .46/o times the second tier fiscal year payroll . The Risk Pool's Payment on Amortization Bases is a temporary adjustment to the pool's contribution to "get the poo l back on schedule" This temporary adjustment varies in amount and duration from pool to pool . As of June 30, 2009 Existing Plan New Second Tier Pla n 3% @ 50 with 1-year FAC 3% @ 55 with 3-year FAC fo r newly hired member s 2011-2012 Employer Contribution Rate: Risk Pool's Net Employer Normal Cost 17 .164%15 .725% Risk Pool's Payment on Amortization Bases 5.927%4.583 % One-Year Final Compensation 1 .021%0 .000 % PRSA 50%1.709%1 .754% Phase out of Normal Cost Difference 0.102%0.000% Amortization of Side Fund 12,978%0,000% Total Employer Contribution Rate 38.901%22.062 % 2011-2012 Employee Contribution Rate 9 .000%9 .000% California Public Employees' Retirement Syste m www.calpers .ca.gov PH1-1 0 ATTACHMENT 2 SAI t I Y PLAN OF THE CITY OF SAN LUIS OBISPO (CALPERS ID: 7574628515 ) February 2012 Page 2 For 2012-2013 the percentage savings is (17 .245%+2.735%) - (15.524%+.745%) = 2 .711%.Based on the 201 0 valuation, the ultimate employer annual dollar savings would then be 2 .7% times the second tier fisca l year payroll . The Risk Pool's Payment on Amortization Bases is a temporary adjustment to the pool's contribution to "get the poo l back on schedule". This temporary adjustment varies in amount and duration from pool to pool. As of June 30, 2010 Existing Plan New Second Tier Plan 3% @ 50 with 1-year FAC 3% @ 55 with 3-year FAC for newly hired member s 2012-2013 Employer Contribution Rate : Risk Pool's Net Employer Normal Cost 17.245%15.524% Risk Pool's Payment on Amortization Bases 6 .436%4.533 % One-Year Final Compensation 1 .025%0 .000% PRSA 50%1 .710%1 .745% Phase out of Normal Cost Difference 0 .051%0 .000 % Amortization of Side Fund 13 .443%0 .000 % Total Employer Contribution Rate 39.910%21 .802% 2012-2013 Employee Contribution Rate 9.000%9.000% To initiate an amendment to the contract, please follow the Contract Amendment Report process on MyCaIPERS with our Retirement Contract Services Unit, indicating your wish to contract for Section 20475 (Different Level of Benefits) an d 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 publi c agency within five days of receipt of the contract amendment cost analysis,to provide each employee organization with a copy of the analysis . If this cost analysis was requested by an employee organization, the employee organization i s also required within five days of receipt of the analysis, to provide a copy of the analysis to the public agency . The June 30, 2010 Section 2 Risk Pool actuarial valuation report applicable to your new second tier plan can be viewe d on the following website: http ://www.calpers.ca.gov/index.jsp?tic=/employer/actuarial-gasblrlsk-pooling/valuation-reports .xml If you have questions, please call (888) CaIP€RS (225-7377). BARBARA J . WARE, FSA, MAA A Enrolled Actuary Senior Pension Actuary, CaIPERS PHI-1 1 Page intentionally lef t blank .