HomeMy WebLinkAbout05/07/2002, 3 - AMENDMENT OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) CONTRACT TO PROVIDE ONE-YEAR FIN C o U n C Y t Mmiinu Dam
5-7-02
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acEnba aepoRt 6.N.
C I T Y OF SAN LU I S O B I S P O
FROM: Ann Slate, Director of Human esources l f
Prepared By: Karen Jenny, Risk Manager
SUBJECT: AMENDMENT OF CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM (PERS) CONTRACT TO PROVIDE ONE-
YEAR FINAL COMPENSATION WHEN CALCULATING
RETIREMENT BENEFITS FOR POLICE SAFETY EMPLOYEES
CAO RECOMMENDATION
Adopt a resolution of intention and introduce an ordinance to print approving an amendment to
the contract between the Board of Administration of PERS and the City of San Luis Obispo to
provide one-year final compensation when calculating retirement benefits for Police safety
members.
DISCUSSION
The 2000-04 Memorandum of Agreement with the San Luis Obispo Police Officers' Association
(SLOPOA), which was adopted by the Council on February 19, 2002, included a provision to
amend the City's contract with PERS to provide for one-year final compensation when
calculating retirement benefits for all police safety members.
Government Code Section 20042 allows the period for determining the average monthly pay rate
when calculating retirement benefits to be the twelve highest paid consecutive months, rather
than 36 months. Since one of the factors in determining the amount of an employee's pension is
based on salary prior to retirement, this provides a higher level of benefit to the employee at
retirement. Sworn officers hired prior to July 1, 1987, have this benefit; this amendment would
apply "single-highest year" to all sworn officers. Fire safety employees hired prior to July 1,
1986, and all miscellaneous employees also have the "single-highest year." Using the final
twelve months' compensation as the basis for retirement benefits is the standard among PERS
agencies.
Government Code Section 7507 requires that the change in benefits of the proposed contract
amendment be made public at a public meeting at least two weeks prior to the adoption of the
final ordinance. The City Clerk will certify compliance on the form provided by PERS.
FISCAL IMPACT
The annual cost to provide one-year final compensation to the remainder of Police safety
employees is estimated to be 0.311% of the total safety payroll, or approximately $24,000.
Although the "single-highest year" formula will be implemented only for Police personnel at this
time, police and fire are combined in one safety retirement plan. The change to the employer rate
will apply to both Police and Fire payrolls. 3-1
Council Agenda Report—Amendment of PERS Contract to Provide One-Year Final
Compensation When Calculating Retirement Benefits for Police Safety Members
Page 2
As we did with the implementation of 3% @ 55 for Fire safety personnel, the City can use 100%
of the market value of assets for this contract amendment also. As a result of the recent
implementation of 3% @ 55 for Fire safety personnel, we are anticipating an employer rate of
4.221% beginning July 1, 2002. By using the remainder of the "cushion"to fund the cost of this
benefit, the City's employer rate will be reduced by 0.375% at the time of implementation (July
18, 2002) until June 30, 2003. Without using the remainder of the "cushion" the employer rate
would go to 4.924% on the day "single highest year" is implemented (July 18, 2002). The
following chart shows the impact of using 100% of the market value of assets at time of
implementation:
Percent Dollar
2002-03 Employer Rate for Safety Retirement Plan after 4.221%0 $ 325,384
implementation of 3% @ 55 for Fire safety members but prior to
im lementin "sin le highest ear" for Police safety members
2002-03 Employer Rate for Safety Retirement Plan with 3.846% $ 296,477
implementation of"single highest year" for Police safety members
and using 100%of plan assets
Savings in 2002-03 $ 29,907
By using up the "cushion", we are able to achieve a slightly lower employer rate at this time,
when major City revenue sources are flat or declining. However, because of the decline in the
PERS retirement plan's investment performance and not having the "cushion" to absorb rate
fluctuations, we will likely see larger rate increases in future years to offset the lower initial rate
at implementation. The ultimate cost for this benefit increase will be about the same,whether we
start with a higher or lower initial rate. The financial impact can be delayed until a point that the
City revenues rebound to fund the increased employer rate and the increased costs can be
included in the next two-year financial plan.
The 2000-04 MOA with SLOPOA also calls for implementation of the 3% @ 50 retirement
formula on March 1, 2003. Additionally, the 2001-05 MOA with the Fire Union also calls for
implementation of the 3% @ 50 retirement formula on December 31, 2005. The cost to
implement these retirement enhancements will be determined at the time they are implemented.
ALTERNATIVES
Since this change was approved as part of the 2000-04 MOA, failure to pass this resolution and
ordinance would place the City in breach of contract with the SLOPOA.
ATTACHMENTS
1. Resolution of Intention
2. Ordinance
3. Certification of Compliance with Goverment Code Section 7507 3-2
I
ATTACHMENT I
RESOLUTION NO. (2002 Series)
RESOLUTION OF INTENTION TO APPROVE AN AMENDMENT
TO THE CONTRACT BETWEEN THE BOARD OF ADMINISTRATION OF THE
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND
THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO
WHEREAS, the Public Employees' Retirement Law permits 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 amendments to 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 summary of the change proposed
in said contract; and
WHEREAS,the following is a statement of the proposed change:
To provide Section 20042 (One-Year Final Compensation)
for local police members only.
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 A"and by this reference made a part hereof.
Upon motion of , seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted this day of , 2002.
3-3
ffACHMENT 1,
Resolution No (2002 Series) Page 2
Mayor Allen Settle
ATTEST:
Lee Price, City Clerk
APPROVED AS TO FORM:
G. org en, ty Attorney
3-4
r
I
Ca1PERS
EXHIBIT
California
Public Employees' Retirement System
AMENDMENT TO CONTRACT
Between the
Board of Administration
California Public Employees' Retirement Systema
and the
City Council
City of San Luis Obispo
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, October 3, 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 and March 28, 2002
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 executed effective
March 28, 2002, 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, age 55 for local fire members, and age 50 for local
police members.
2. Public Agency shall participate in the Public Employees' Retirement System
from and after July 1, 1952 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. 3-5
- PLEASE DO NOT SIG*XHIBIT ONLY" -',6't
3. 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. 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).
4. 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. CROSSING GUARDS.
5. The percentage of final compensation 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).
6. The percentage of final compensation to be provided for each year of credited
prior and current service as a local police member shall be determined in
accordance with Section 21362 of said Retirement Law (2% at age 50 Full).
7. The percentage of final compensation to be provided for each year of credited
prior and current service as a local fire member shall be determined in
accordance with Section 21363.1 of said Retirement Law (3% at age 55 Full).
8. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 21573 (Third Level of 1959 Survivor Benefits) for local fire
members only.
b. Section 21574 (Fourth Level of 1959 Survivor Benefits) for local
miscellaneous members and local police members only.
C. Sections 21624, 21626 and 21628 (Post-Retirement Survivor Allowance)
for local safety members only.
d. Section 20965 (Credit for Unused Sick Leave).
e. Section 20042 (One-Year Final Compensation) for local miscellaneous
members and local police members, and for those local fire members
entering membership on or prior to July 1, 1986.
3-6
I�� �
PLEASE 00 NOT S "EXHIBIT ONL Y71
f. Section 20475 (Different Level of Benefits Provided for New Employees).
Section 20042 (One-Year Final Compensation) is not applicable to local
fire members entering membership after July 1, 1986.
g. Section 20903 (Two Years Additional Service Credit) for local
miscellaneous members only
h. Section 21024 (Military Service Credit as Public Service), Statutes of
1976.
9. Public Agency, in accordance with Government Code Section 20790, ceased to
be an "employer' for purposes of Section 20834 effective on June 1, 1976.
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.
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 and local safety 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 fire members.
b. Contributions required per covered member on account of 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 police members and local
miscellaneous members.
C. 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.
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 by law.
3-7
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 effectil� on the day of
BOARD OF ADMINISTRATION ® CITY COUNCIL y
PUBLIC EMPLOYEES' RETIRE SYSTEM CITY OF SAN LUIS OBIb
BY BY r.
KENNETH W. MARZIO�. HIEF PRESIDING C- CER
ACTUARIAL & EMPLC)'ER SERVICES DIVISION n
PUBLIC EMPLOYE RETIREMENT SYSTEM Gj
s Date
< est:
Clerk
AMENDMENT
PERS-CON--02A(Rev.8\96)
3-8
ORDINANCE NO. (2002 Series)
AN ORDINANCE OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE COUNCIL OF
THE CITY OF SAN LUIS OBISPO AND THE BOARD OF ADMINISTRATION OF THE
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
WHEREAS, the Public Employees' Retirement Law permits 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 amendments to 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 an ordinance authorizing the amendment and
directing the Mayor to execute said amendment.
BE IT ORDAINED by the Council of the City of San Luis Obispo as follows:
SECTION 1. That an amendment to the contract between the Council of the City of San
Luis Obispo and the Board of Administration, California Public Employees' Retirement System
is hereby authorized, a copy of said amendment being attached hereto, marked "Exhibit A", and
by such reference made a part hereof as though herein set out in full.
SECTION 2. The Mayor is hereby authorized, empowered and directed to execute said
amendment for and on behalf of the City of San Luis Obispo.
SECTION 3. A summary of this ordinance, approved by the City Attorney, together
with the names of the Council members voting for and against it, shall be published at least five
days prior to its final passage, in the Tribune, a newspaper published and circulated in this City.
This ordinance will go into effect at the expiration of thirty (30) days after its final passage.
INTRODUCED on the day of 2002,
AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the day
of 2002, on the following roll call vote:
AYES:
NOES:
ABSENT:
3-9
Ordinance No. (2002 Series)
Page 2
Mayor Allen Settle
ATTEST:
Lee Price, City Clerk
APPROVED AS TO FORM:
e ep;/org en, ty Attorney
3-10
Ca1PERS
EXHIBIT
California
Public Employees' Retirement System
AMENDMENT TO CONTRACT
Between the
Board of Administration
California Public Employees' Retirement System
and the
City Council
City of San Luis Obispo
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, October 3, 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 and March 28, 2002
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 executed effective
March 28, 2002, 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, age 55 for local fire members, and age 50 for local
police members.
2. Public Agency shall participate in the Public Employees' Retirement System
from and after July 1, 1952 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 oniv on the
election of a contracting agency.
PLEASE DO NOT SIU "EXHIBIT ONLY
3. 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. 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).
4. 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. CROSSING GUARDS.
5. The percentage of final compensation 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).
6. The percentage of final compensation to be provided for each year of credited
prior and current service as a local police member shall be determined in
accordance with Section 21362 of said Retirement Law (2% at age 50 Full).
7. The percentage of final compensation to be provided for each year of credited
prior and current service as a local fire member shall be determined in
accordance with Section 21363.1 of said Retirement Law (3% at age 55 Full).
8. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 21573 (Third Level of 1959 Survivor Benefits) for local fire
members only.
b. Section 21574 (Fourth Level of 1959 Survivor Benefits) for local
miscellaneous members and local police members only.
C. Sections 21624, 21626 and 21628 (Post-Retirement Survivor Allowance)
for local safety members only.
d. Section 20965 (Credit for Unused Sick Leave).
e. Section 20042 (One-Year Final Compensation) for local miscellaneous
members and local police members, and for those local fire members
entering membership on or prior to July 1, 1986.
3-12
PLEASE DO NOT So "EXHIBIT ONLY"
f. Section 20475 (Different Level of Benefits Provided for New Employees).
Section 20042 (One-Year Final Compensation) is not applicable to local
fire members entering membership after July 1, 1986.
g. Section 20903 (Two Years Additional Service Credit) for local
miscellaneous members only
h. Section 21024 (Military Service Credit as Public Service), Statutes of
1976.
9. Public Agency, in accordance with Government Code Section 20790, ceased to
be an "employer' for purposes of Section 20834 effective on June 1, 1976.
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.
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 and local safety 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 fire members.
b. Contributions required per covered member on account of 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 police members and local
miscellaneous members.
C. 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.
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 by law.
3-13
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 ADMINISTRATIONCITY COUNCIL
PUBLIC EMPLOYEES' RETIREMEI&4YSTEM CITY OF SAN LUIS OBISPO
Q`
BY lzkolj� BY
KENNETH W. MARZION, qffleF PRESIDING OFFICER
ACTUARIAL & EMPLOY Z ERVICES DIVISION
PUBLIC EMPLOYEEtTIREMENT SYSTEM `
Witness Date
c.�4•� Attest;-•l
C <. U
61\; r•�J
Clerk
AMENDMENT
PERS-CON-702A(Rev.8\96)
3-14
CALIFORNIA PRIC EMPLOYEES' RETIREMENTATEM TTAI�,MOMENT 3
Actuarial and Employer Services Division
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
(916) 326-3420
CERTIFICATION OF COMPLIANCE WITH
GOVERNMENT CODE SECTION 7507
I hereby certify that in accordance with Section 7507 of the Government Code
the future annual costs as determined by the System Actuary and/or the increase
in retirement benefit(s) have been made public at a public meeting of the
City Council of the
(governing body)
City of San Luis Obispo
(public agency)
on May 7, 2002. which is at least two weeks prior to the adoption of the
(date)
Resolution / Ordinance.
Clerk/Secretary
Title
Date
PERS-CON-12A(rev. 1/96)
3-15