HomeMy WebLinkAbout10 AMENDING CITY'S CONTRACT WITH CALPERSAgenda Item 10
~ Reviewed:
AGENDA REPORT City Manager
Finance Directo
MEETING DATE: OCTOBER 18, 2011
TO: WILLIAM A. HUSTON, INTERIM CITY MANAGER
FROM: KRISTI RECCHIA, DIRECTOR OF HUMAN RESOURCES
SUBJECT: AMENDING THE CITY'S CONTRACT WITH THE CALIFORNIA PUBLIC
EMPLOYEES' RETIREMENT SYSTEM (CALPERS) TO PROVIDE A SECOND
TIER RETIREMENT PLAN FOR NEW EMPLOYEES
SUMMARY
The City has negotiated agreements with all of its bargaining units to provide a second tier
retirement plan for new employees enrolled in a California Public Employees' Retirement
System (CaIPERS) retirement plan (2% @ 60 for Miscellaneous and 2% @ 50 for Safety).
Adoption of the attached Resolution of Intention and introduction of the attached Ordinance
are the first steps in the contract amendment process specified by CaIPERS.
RECOMMENDATION
It is recommended that the City Council take the following actions to initiate the CaIPERS
contract amendment process:
1. Adopt Resolution No. 11-75, a Resolution of Intention to amend the contract
between the City of Tustin and the Board of Administration of CaIPERS; and
2. Introduce by title only and waive reading of Ordinance No. 1408 authorizing said
amendment.
FISCAL IMPACT
Second tier retirement plans offer long-term savings based on lower employer retirement
contributions for employees hired on or after the effective date of implementation (January
1, 2012). Cost savings will be realized gradually as more employees become enrolled in the
second tier plans and fewer employees remain in the existing plans.
The 2011-12 employer rate for the existing Safety plan (3% @ 50) is 32.170%. According to
the CaIPERS amendment actuarial valuation, the 2011-12 employer rate for the second tier
Safety plan (2% @ 50) will be 19.169%, a rate that is approximately 13% lower. The second
tier contribution rate will apply only to those individuals employed by the City of Tustin for
the first time in a Safety (sworn Police) classification on or after the implementation date of
January 1, 2012.
For the existing Miscellaneous Plan (2% @ 55), the 2011-12 employer rate is 9.943%. Per
CaIPERS, there will be no immediate employer contribution rate decrease for the second
City Council Agenda Report
October 18, 2011
Amending the City's Contract with CaIPERS
Page 2
tier plan (2% @ 60). Decreases in the Miscellaneous employer rate will occur gradually as
employees are hired and added into the second tier plan.
BACKGRQUND AND DISCUSSION
As part of the City's labor negotiations process earlier this year, the Council directed staff to
address the City's personnel costs, particularly with respect to retirement. After months of
difficult negotiations, the City reached agreement with all four bargaining groups on new
labor contracts. A key component of each deal was the implementation of a second tier
retirement plan for new employees hired by the City on or after January 1, 2012.
Currently, Miscellaneous employees are enrolled in the 2% @ 55 plan, with a retirement
benefit based on the single highest year of compensation earnable, and the employees pay
3.5% to 5.5% of the 7% employee contribution (amount varies by employee group). Safety
employees are currently enrolled in the 3% @ 50 plan, with a retirement benefit based on
the single highest year of compensation earnable, and employees pay 4% to 4.5% of the
9% employee contribution (amount varies by employee group).
The CaIPERS contract amendment for second tier plans will apply to all new City
employees, including unrepresented employees. All employees hired by the City for the first
time into a Miscellaneous classification on or after January 1, 2012 will be enrolled in the
2% @ 60 plan, which provides a retirement benefit based on the employee's highest annual
average compensation earnable for a period of three (3) consecutive years. All
Miscellaneous employees in the second tier plan will immediately pay the full 7°lo employee
contribution.
All employees hired by the City for the first time into a Safety classification on or after
January 1, 2012 will be enrolled in the 2% @ 50 plan, which provides a retirement benefit
based on the employee's highest annual average compensation earnable for a period of
three (3) consecutive years. All Safety employees in the second tier plan will immediately
pay the full 9% employee contribution.
While the implementation of second tier retirement plans will have a small impact this fiscal
year, the cost savings will grow increasingly significant each year as more employees are
added to the second tier plans and current employees leave the existing plans due to
retirement or separation. The long-term savings resulting from this change will be
substantial.
In addition, the City's labor agreements also provide cost savings for current employees via
reductions in the City's contributions to CaIPERS. For the current fiscal year, employees will
continue to pay approximately half of the employee contribution to CaIPERS, acost-saving
measure that was implemented for the 2010-11 fiscal year. However, the agreements
include provisions that will ensure all current employees increase their contributions
City Council Agenda Report
October 18, 2011
Amending the City's Contract with CaIPERS
Page 3
incrementally over time and pay the full employee contribution (7% for Miscellaneous and
9% for Safety) by July 1, 2015.
Taken together, the implementation of second tier retirement plans for new employees and
increased retirement contributions for existing employees achieve the pension reform
objectives sought by the Council and will reduce the City's personnel expenditures in the
near-term as well as the long-term,
To ensure the contract amendment is processed in a timely manner, CaIPERS requires that
the City Council adopt the Resolution of Intention using the document provided by
CaIPERS. CaIPERS also requires that the City Clerk certify the City Council's action and
certify compliance with Government Code Section 7507 on the forms provided by CaIPERS.
Kristi Recchia
Director of Human Resources
Attachments:
1. City Council Resolution No. 11-75
2. Exhibit -Amendment to Contract
3. Certification of Governing Body's Action
4. Certification of Compliance with Government Code Section 7507
5. City Council Ordinance No. 1408
RESOLUTION NO. 11-75
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 TUSTIN
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 20475 (Different Level of Benefits). Section 21353
(2% @ 60 Full formula) and Section 20037 (Three-Year Final
Compensation) are applicable to local miscellaneous members entering
membership for the first time in the miscellaneous classification after the
effective date of this amendment to contract, and
Section 20475 (Different Level of Benefits). Section 21362 (2% @ 50 Full
formula) and Section 20037 (Three-Year Final Compensation) are
applicable to local police members entering membership for the first time
in the police 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. 4196}
~~.
C~IPIiRS
EXHIBIT
California
Public Employees' Retirement System
~?-.MEN~MENT TO COl\TTF-rA~Z'
Between the
Board of Administration
California Public Employees' Retirement System
and the
City Council
City of Tustin
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 August
1, 1967, and witnessed June 28, 1967, and as amended effective October 1, 1969,
June 18, 1979, December 29, 1980, February 26, 1990, October 5, 1992, December 28,
1992, July 6, 1995, April 5, 1996, June 6, 1996, March 28, 1997, December 31, 1999,
April 8, 2002 and June 30, 2003 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 June 30, 2003, and hereby replaced by the following paragraphs
numbered 1 through 16 inclusive:
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, 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 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 August 1, 1967 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 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
the retirement benefits, provisions or formulas provided under
the Public Agency's prior non-CaIPERS retirement program.
(b) Public Agency's 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 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.
(d) Public Agency's election to file for bankruptcy under Chapter 9
(commencing with section 901) of Title 11 of the United States
Bankruptcy Code and/or Public Agency's election to reject this
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 termination of this Contract either voluntarily by request of
Public Agency or involuntarily pursuant to the Public Employees'
Retirement Law.
(g) Changes sponsored by Public 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 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. PERSONS COMPENSATED ON AN HOURLY BASIS.
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
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 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 fire member shall be
determined in accordance with Section 21366 of said Retirement Law
(One-half pay at age 55 Full).
9. The percentage of final compensation to be provided for each year of
credited prior and current service as a local police member entering
membership in the police classification on or prior to the effective date of
this amendment to contract shall be determined in accordance with
Section 21362.2 of said Retirement Law (3°I° at age 50 Full).
10. The percentage of final compensation to be provided for each year of
credited current service as a local police member entering membership for
the first time in the police classification after the effective date of this
amendment to contract shall be determined in accordance with Section
21362 of said Retirement Law (2% at age 50 Full).
11. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 21571 (Basic Level of 1959 Survivor Benefits) for local fire
members only.
b. Section 20042 (One-Year Final Compensation) for those local
miscellaneous members and local police members entering
membership on or prior to the effective date of this amendment to
contract.
c. Section 21574 (Fourth Level of 1959 Survivor Benefits) for local
police members only.
d. Section 21024 (Military Service Credit as Public Service) for local
miscellaneous members and local police members only.
e. Section 21573 (Third Level of 1959 Survivor Benefits) for local
miscellaneous members only.
f. Section 21583 (Additional Opportunity to Elect 1959 Survivor
Benefits) for local police members only.
g. Section 20475 (Different Level of Benefits). Section 21353 (2% @
60 Full formula) and Section 20037 (Three-Year Final
Compensation) are applicable to local miscellaneous members
entering membership for the first time in the miscellaneous
classification after the effective date of this amendment to contract.
Section 21362 (2% @ 50 Full formula) and Section 20037 (Three-
Year Final Compensation) are applicable to local police members
entering membership for the first time in the police classification
after the effective date of this amendment to contract.
12. Public Agency, in accordance with Government Code Section 20790,
ceased to be an "employer" for purposes of Section 20834 effective on
June 18, 1979. 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.
13. 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.
14. 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 miscellaneous 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.
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.
15. 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.
16. 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 TUSTIN
BY BY
DARRYL WATSON, CHIEF PRESIDING OFFICER
CUSTOMER ACCOUNT SERVICES DIVISION
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Witness Date
Attest:
Clerk
AMENDMENT ER# 688
PEAS-CdN-702A
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Branch
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
{888) CaIPERS (225-7377)
CERTIFICATION OF GOVERNING BODY'S ACTION
hereby certify that the foregoing is a true and correct copy of a Resolution adopted by the
{governing body)
of the
{public agency)
on
{date)
ClerklSecretary
Title
PERS-CON-12 (rev. 1l96}
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Branch
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
(8$8) CaIPERS (225-7377)
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 for the
increase/change in retirement benefit(s) have been made public at a public meeting
of the
(governing body)
(public agency)
of the
on which is at least two weeks prior to the adoption of the
(date)
Resolution 1 Ordinance.
Adoption of the retirement benefit increase/change will not be placed on the consent
calendar.
Clerk/Secretary
Date
Title
PERS-CON-12A (rev. 1/96)
ORDINANCE NO. 1408
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF TUSTIN, CALIFORNIA, AUTHORIZING AN
AMENDMENT TO THE CONTRACT BETWEEN THE CITY
OF TUSTIN AND THE BOARD OF ADMINISTRATION OF
THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT
SYSTEM
The City Council of the City of Tustin, California hereby ordains as follows:
Section 1.
That an amendment to the contract between the City Council of the City of Tustin and
the Board of Administration, California Public Employees' Retirement 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 Tustin is hereby authorized, empowered, and directed to
execute said amendment for and on behalf of the City of Tustin.
Section 3.
The City Clerk shall certify to the passage and adoption of this ordinance and shall
cause the same to be published in the same manner required by law. This ordinance
shall become effective thirty (30) days from and after its passage.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Tustin
held on the 15th day of November 2011.
JERRY AMANTE
Mayor
ATTEST:
PAMELA STOKER
City Clerk
Ordinance No. 1408
Page 1 of 2
APPROVED AS TO FORM:
DAVID KENDIG
City Attorney
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) SS
CITY OF TUSTIN )
I, Pamela Stoker, City Clerk and ex-officio Clerk of the City Council of the City of Tustin,
California, do hereby certify that the whole number of the members of the City Council of
the City of Tustin is five; that the above and foregoing Ordinance No. 1408 was duly and
regularly introduced at a regular meeting of the Tustin City Council, held on the 18t" day of
October 2011, and was given its second reading, passed, and adopted at a regular
meeting of the City Council held on the 15t" day of November 2011 by the following vote:
COUNCILMEMBER AYES:
COUNCILMEMBER NOES:
COUNCILMEMBER ABSTAINED:
COUNCILMEMBER ABSENT:
PAMELA STOKER
City Clerk
Ordinance No. 1408
Page 2 of 2