HomeMy WebLinkAboutItem 09 - Second Reading of Ordinance No. 1680 (2020 Series) authorizing an amendment to the City's contract with CalPERSItem 9
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Council- d. Report
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Department Name:
Cost Center:
For Agenda of:
Placement:
Estimated Time:
FROM: Monica Irons, Human Resources Director
Prepared By: Brittani Roltgen, Human Resources Analyst
Human Resources
3001
May 5, 2020
Business Item
10 Minutes
SUBJECT: SECOND READING OF ORDINANCE NO. 1680 (2020 SERIES)
AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN
THE CITY OF SAN LUIS OBISPO AND THE BOARD OF
ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM TO PROVIDE SECTION 20516 (COST
SHARING)
RECOMMENDATION
Adopt Ordinance No. 1680 (2020 Series) (Attachment A) authorizing an amendment to the
contract between the Board of Administration of the California Public Employees' Retirement
System (Ca1PERS) and the City of San Luis Obispo (Attachment B).
DISCUSSION
Background
On April 17, 2018, the City Council adopted a Fiscal Health Response Plan (FHRP) that outlines
actions through fiscal year 2020-21 aimed at closing an approximate $8.9 million budget gap due
to Ca1PERS discount rate reductions resulting in increasing retirement costs to agencies. The
FHRP anticipated employee concessions equaling $1.9M by fiscal year 2020-21. The City's
focus and primary concession interests included achieving three-year successor agreements with
employee groups that provide certainty around compensation costs during the FHRP term,
increased employee contributions to retirement costs, and maintaining competitive wages and
benefits to support recruitment and retention objectives.
Status of Negotiations
The City has made significant progress in achieving the employee concession goal as outlined in
the FHRP. Memoranda of Agreement, which include modest cost of living increases offset by
employees paying more towards retirement costs in 2019 and 2020, were negotiated and
approved by Council with the Police Officers Association (POA), San Luis Obispo Police Staff
Officers Association (SLOPSOA), and the International Association of Firefighters, Local 3523
(Fire). Resolutions governing unrepresented management, department heads, appointed officials
and confidential employees also included modest cost of living increases offset by employees
paying more towards retirement costs in 2019 and 2020. These memoranda include a phased
approach of retirement cost -sharing, with 1.5% taking effect the first full pay period in July
2019, and an additional 1.5% scheduled to take effect the first full pay period in July 2020.
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Item 9
Previous Council Action
On May 7, 2019, Council adopted Ordinance No. 1660 (2019 Series) authorizing an amendment
to the contract between the Board of Administration of the California Public Employees'
Retirement System (CalPERS) and the City of San Luis Obispo. This contract amendment
authorized CalPERS to reduce the required employer contribution by 1.5% and increase the
employee contribution by 1.5%.
All employees currently pay the full employee contribution and the additional contributions
agreed to are listed in the chart below:
Police (Sworn) Employee Contribution Levels to PERS Retirement
(Percent of Salary)
Safety PERS Tier
Current
Jul-20
Tier 1 (3% @ 50)
13.50%
15%
Tier 2 (2% @ 50)
13.50%
15%
Tier 3 (2.7% @ 57)
14.25%
15.75%
Police (Non -Sworn) Employee Contribution Levels to PERS Retirement
(Percent of Salary)
Miscellaneous PERS Tier
Current
Jul-20
Tier 1 (2.7% @ 55)
12.50%
14%
Tier 2 (2% @ 60)
12.50%
14%
Tier 3 (2% @ 62)
8.50%
10%
Fire (Sworn) Employee Contribution Levels to PERS Retirement
Safety PERS Tier
Current
Jul-20
Tier 1 (3% @ 50)
10.50%
12%
Tier 2 (2% @ 50)
10.50%
12%
Tier 3 (2.7% @ 57)
14.25%
15.75%
Employee Contribution Levels (includes appointed officials, department heads,
unrepresented management, unrepresented confidential and non -sworn fire employees)
to PERS Retirement
Miscellaneous PERS Tier Current
Jul-20
Tier 1 (2.7% @ 55)
9.50%
11 %
Tier 2 (2% @ 60)
8.50%
10%
Tier 3 (2% @ 62)
8.50%
10%
The City is currently in negotiations with San Luis Obispo City Employees Association
(SLOCEA), whose Memorandum of Agreement expired on June 30, 2019 and who are not
making any additional contributions to CalPERS.
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Cost Sharing of Employer Pension Costs
Additional employee contributions toward the employer's normal costs are allowed by CalPERS
under section 20516 (Cost Sharing) of the Public Employees Retirement Law (PERL), which is
codified in the California Government Code. If employees agree to cost sharing, Section 20516
allows for additional contributions to be made based on the Memorandum of Agreement or
through a contract amendment with CalPERS. Additional contributions made through
Memorandum of Agreements without a contract amendment with CalPERS will not be credited
to the employee account and CalPERS will not make an adjustment to the employee contribution
rate in future actuarial reports. If there is agreement for additional contributions through contract
amendment, CalPERS will lower the City contribution percentage and increase the employee
contribution percentage by the agreed amount, and this will be reflected in future billings and
actuarial reports. The additional employee contributions made under the contract amendment
would be applied to the employee's retirement account.
The Police Officers Association (POA) and San Luis Obispo Police Staff Officers Association
(SLOPSOA) negotiated cost sharing to be based on the Memorandum of Agreement and not
through a contract amendment. Fire, Unrepresented Management, and Unrepresented
Confidential Employees agreed to pay the additional contributions through a contract
amendment with CalPERS.
Amending Contract with CalPERS
There are two main steps the City must undertake to complete the contract amendment with
CalPERS:
1. Approve a Resolution of Intention to amend the contract.
Resolution No. 11092 (2020 Series) was approved by Council on March 7, 2020. This
Resolution of Intention was submitted to CalPERS on March 18, 2020, which allowed
CalPERS staff authority to finalize draft contract language.
2. Adopt an Ordinance.
City Council introduced Ordinance No. 1680 (2020 Series) on March 7, 2020 authorizing an
amendment to the contract between the City of San Luis Obispo and CalPERS. More than
20 days have passed since the Resolution No. 11092 (2020 Series) was adopted by Council
on March 7, 2020 and the first reading of Ordinance No. 1680 (2020 Series), in accordance
with Government Code Section 20471. This constitutes the second reading of the ordinance
amending the current contract. Upon adoption by Council, the contract with CalPERS will
be amended and the cost sharing will go into effect at the start of the first full pay period in
July 2020.
Policy Context
City Council adopted the FHRP on April 17, 2018 which assumed additional employee
contributions toward retirement costs. City Council adopted Resolution 11092 (2020 Series)
authorizing CalPERS to proceed with draft contract amendment.
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Item 9
Public Engagement
The City met with employee groups and agreed to the Ca1PERS contract amendment. The
Council approved the Memorandum of Agreement with the International Association of
Firefighters, Local 3523 (Fire) and resolutions governing unrepresented management,
department heads, appointed officials and confidential employees.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act does not apply to the recommended action in this
report, because the action does not constitute a "Project" under CEQA Guidelines Sec. 15378.
FISCAL IMPACT
Budgeted: Yes Budget Year: 2020-2021 and ongoing
Funding Identified: Yes
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding Request
Remaining
Balance
Annual Ongoing
Cost
General Fund
($685,156)
State
Federal
Fees
Other:
Total
($685,186)
Ca1PERS will reduce the required employer contribution by 1.5% which will result in an
ongoing savings of approximately $685,156 for Fire, POA, SLOPSOA, and the Unrepresented
Management and Confidential groups by the end of fiscal year 2020-2021. These savings are
part of the FHRP's strategy to close the $8.9M budget gap.
ALTERNATIVES
Do not approve the resolution and ordinance. This alternative is not recommended since this
change was approved by Resolutions and negotiated Memorandums of Agreement with employee
groups and failure to amend the contract with CAPERS would place the City in violation of those
agreements.
Attachments:
a - Ordinance No. 1680 (2020 Series)
b - Contract Amendment
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Item 9
ORDINANCE NO. 1680 (2020 SERIES)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, AUTHORIZING AN AMENDMENT TO THE
CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF SAN
LUIS OBISPO, CALIFORNIA, AND THE BOARD OF ADMINISTRATION
OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
WHEREAS, the City of San Luis Obispo has contracted with the California Public
Employees' Retirement System (Ca1PERS) for retirement benefits for its sworn Police Safety,
sworn Fire Safety and Miscellaneous employees since July 1, 1952; and
WHEREAS, over the years, the City has amended its retirement benefit structure to reflect
changes as negotiated during the meet -and -confer process with each bargaining group; and
WHEREAS, the City acted to ensure the retirement pension system is sustainable and
amended the retirement contract to provide reduced benefit second tier retirement formulas for all
employee groups; and
WHEREAS, City employees committed to ensure their retirement pension system is
sustainable by paying their full member contributions as established in the Public Employee
Retirement Law; and
WHEREAS, City Council approved Resolution 10919 ratifying the memorandum of
agreement between the City and the San Luis Obispo Firefighters Local 3523 and authorized an
increase to the employee contribution to Ca1PERS as allowed in Government Code section 20516
to contribute an additional one and one-half percent (1.5%) toward their retirement costs; and
WHEREAS, City Council approved Resolution 10920 regarding compensation and
benefits for appointed officials, department heads, and management employees and authorized an
increase to the employee contribution to Ca1PERS, as allowed in Government Code section 20516,
to contribute an additional one and one-half percent (1.5%) toward their retirement costs; and
WHEREAS, City Council approved Resolution 10953 regarding compensation and
benefits for unrepresented confidential employees and authorized an increase to the employee
contribution to Ca1PERS as allowed in Government Code section 20516 to contribute an additional
one and one-half percent (1.5%) toward their retirement costs; and
WHEREAS, the increased employee contribution for these employee groups would be
effective the first full pay period of July 2020; and
WHEREAS, the City is amending its contract with Ca1PERS to provide that, pursuant to
Government Code Section 20471, there must be at least a 20-day period between the adoption of
the Resolution of Intention and the adoption of the final Ordinance.
O 1680
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Ordinance No. 1680 (2020 Series)
Item 9
Page 2
NOW, THEREFORE, 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 City 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 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. This ordinance shall take effect 30 days after the date of adoption, a summary
of this ordinance, together with the names of Council 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.
INTRODUCED on the 3rd day of March 2020, AND FINALLY ADOPTED by the
Council of the City of San Luis Obispo on the 5th day of May 2020, on the following vote:
AYES:
NOES:
ABSENT:
Mayor Heidi Harmon
ATTEST:
Teresa Purrington, City Clerk
APPROVED AS TO FORM:
J. Christine Dietrick, City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City
of San Luis Obispo, California, on
Teresa Purrington, City Clerk
O 1680
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Item 9
CAPERS
California
Public Employees' Retirement System
A*.
AMENDMENT TO CONTRACT
Between the
Board of Administration
California Public Employees' Retirement System
andthe
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, March 28, 2002, July 18, 2002, January 30, 2003, February 27, 2003, July 14,
2005, December 29, 2005, August 30, 2012, December 6, 2012 and July 11, 2019 which
provides for participation of Public Agency in said System, Board and Public Agency
hereby agree as follows:
A. Paragraphs 1 through 19 are hereby stricken from said contract as executed
effective July 11, 2019, and hereby replaced by the following paragraphs
numbered 1 through 19 inclusive:
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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 classic
local miscellaneous members entering membership in the miscellaneous
classification on or prior to December 6, 2012, age 60 for classic local
miscellaneous members entering membership for the first time in the
miscellaneous classification after December 6, 2012 and age 62 for new
local miscellaneous members; age 50 for classic local police members and
for those classic local fire members entering membership in the fire
classification on or prior to August 30, 2012, age 55 for classic local fire
members entering membership for the first time in the fire classification after
August 30, 2012 and age 57 for new local safety 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. 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 attorney 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) Any dispute, disagreement, claim, or proceeding (including
without limitation arbitration, administrative hearing, or litigation)
between Public Agency and its employees (or their
representatives) which relates to Public Agency's election to
amend this Contract to provide retirement benefits, provisions or
formulas that are different than such employees' 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.
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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. 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 Law, the following classes of employees shall not become
members of said Retirement System:
a. CROSSING GUARDS.
6. The percentage of final compensation to be provided for each year of
credited prior and current service as a classic local miscellaneous member
in employment before and not on or after January 30, 2003 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 classic local miscellaneous member
in employment on or after January 30, 2003 and not entering membership
for the first time in the miscellaneous classification after December 6, 2012
shall be determined in accordance with Section 21354.5 of said Retirement
Law (2.7% at age 55 Full).
8. The percentage of final compensation to be provided for each year of
credited current service as a classic local miscellaneous member entering
membership for the first time in the miscellaneous classification after
December 6, 2012 shall be determined in accordance with Section 21354
of said Retirement Law (2% at age 60 Full).
9. The percentage of final compensation to be provided for each year of
credited prior and current service as a new local miscellaneous member
shall be determined in accordance with Section 7522.20 of said Retirement
Law (2% at age 62 Full).
10. The percentage of final compensation to be provided for each year of
credited prior and current service as a classic local fire member entering
membership in the fire classification on or prior to August 30, 2012 and for
those classic local police members entering membership in the police
classification on or prior December 6, 2012 shall be determined in
accordance with Section 21362.2 of said Retirement Law (3% at age 50
Full).
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11. The percentage of final compensation to be provided for each year of
credited current service as a classic local fire member entering membership
for the first time in the fire classification after August 30, 2012 shall be
determined in accordance with Section 21363.1 of said Retirement Law (3%
at age 55 Full).
12. The percentage of final compensation to be provided for each year of
credited current service as a classic local police member entering
membership for the first time in the police classification after December 6,
2102 shall be determined in accordance with Section 21362 of said
Retirement Law (2% at age 50 Full).
13. The percentage of final compensation to be provided for each year of
credited prior and current service as a new local safety member shall be
determined in accordance with Section 7522.25(d) of said Retirement Law
(2.7% at age 57 Full).
14. 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 classic local fire
members entering membership on or prior to August 30, 2012 and
for those classic local police members and classic local
miscellaneous members entering membership on or prior to
December 6, 2012.
f. Section 20903 (Two Years Additional Service Credit) for local
miscellaneous members only.
g. Section 21024 (Military Service Credit as Public Service).
h. Section 21548 (Pre -Retirement Option 2W Death Benefit).
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Section 20475 (Different Level of Benefits). Section 21363.1 (3% @
55 Full formula) and Section 20037 (Three -Year Final
Compensation) are applicable to local classic fire members entering
membership for the first time with this agency in the fire classification
after August 30, 2012.
Section 21353 (2% @ 60 Full formula) and Section 20037 (Three -
Year Final Compensation) are applicable to classic local
miscellaneous members entering membership for the first time with
this agency in the miscellaneous classification after December 6,
2012.
Section 21362 (2% @ 50 Full formula) and Section 20037 (Three -
Year Final Compensation) are applicable to classic local police
members entering membership for the first time with this agency in
the police classification after December 6, 2012
j. Section 20516 (Employees Sharing Additional Cost):
From and after July 11, 2019 and until the effective date of this
amendment to contract, 1.5% for local miscellaneous members in
the International Association of Firefighters Local 3523,
Unrepresented Management group and Unrepresented Confidential
group.
From and after July 11, 2019 and until the effective date of this
amendment to contract, 1.5% for local fire members in the
International Association of Firefighters Local 3523.
From and after July 11, 2019 and until the effective date of this
amendment to contract, 1.5% for local safety members in the
Unrepresented Management group.
From and after the effective date of this amendment to contract, 3%
for local miscellaneous members in the International Association of
Firefighters Local 3523, Unrepresented Management group and
Unrepresented Confidential group.
From and after the effective date of this amendment to contract, 3%
for local fire members in the International Association of Firefighters
Local 3523.
From and after the effective date of this amendment to contract, 3%
for local safety members in the Unrepresented Management group.
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The portion of the employer's contribution that the member agrees
to contribute from his or her compensation, over and above the
member's normal contribution ("Cost Sharing Percentage"), shall not
exceed the Employer Normal Cost Rate, as that rate is defined in the
CalPERS Actuarial Valuation for the relevant fiscal year. If the Cost
Sharing Percentage will exceed the relevant Employer Normal Cost
Rate, the Cost Sharing Percentage shall automatically be reduced to
an amount equal to, and not to exceed, the Employer Normal Cost
Rate for the relevant fiscal year.
15. 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.
16. 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.
17. 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
miscellaneous members and local police 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.
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18. 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.
19. 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 SAN LUIS OBISPO
BY _ BY
ARNITA PAIGE, CHIEF PRESIDING OFFICER
PENSION CONTRACTS AND PREFUNDING
PROGRAMS DIVISION
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Witness Date
Attest:
Clerk
AMENDMENT CaIPERS ID #7574628515
PERS-CON-702A
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ntract
�+1 O CaIPERS •
Amendment
Monica Irons, Human Resources Director
Brittani Roltgen, Human Resources Analyst
May 05, 2020
Contract Amendment
Requirements
■ Council adopted a resolution of
intention approving the contract
amendment (March 3, 2020)
■Council approved first reading of
an Ordinance authorizing contract
amendment (March 3, 2020)
Contract Amendment
Requirements - Continued
■Final reading and adoption of
Ordinance authorizing contract
amendment (May 5, 2020)
Fiscal Impact
■Reduction of employer pension rates
in future valuation reports
■Increase of employee pension rates in
future valuation reports
■This Contract Amendment will result in
on -going savings of approximately
$685,000 annually