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HomeMy WebLinkAboutItem 2a: Resolution 6785: Paying & Reporting Value of Employer Paid Member Contributions for Safety Employees oFF e4,6 • •lacarparaud :.{� Auu.l 9,IYUI al,r,iry or STAFF REPORT Administrative Services Department DATE: August 2, 2011 TO: Mayor and City Council FR OM: Hue Quach, Administrative Services Director iMichael A. Casalou, Human Resources Administrator Prepared by: Heather McDowell, Senior Human Resources Analyst SUBJECT: Adopt Resolution No. 6785 for Paying and Reportinq the Value of Employer Paid Member Contributions (Safety Employees). Recommendation: Adopt SUMMARY Staff recommends adoption of Resolution No. 6785 allowing grandfathering of safety employees for payment and reporting of the employer paid member contributions hired prior to August 3, 2011. Safety employees hired on or after August 3, 2011 will pay their full employee share, or nine percent (9%), of their pension costs. DISCUSSION At the request of City Council, the City negotiations team has been in lengthy discussions with the City's bargaining groups discussing options for pension reform. The City currently pays an employer share and an employee share of the pension obligations with CaIPERS. The employer share fluctuates based on contributions to the employer account and market performance. The City of Arcadia has realized substantial employer rate increases and expects this trend to continue. The employee share, however, is fixed and set at nine percent (9%) of an employee's salary for safety employees. The existing arrangement for the employer to pick up the employee share of the pension costs is referred to as Employer Paid Member Contribution (EPMC). The EPMC has benefits for both employees and the employer. For employees, the nine percent (9%) is reported to CaIPERS as special compensation for retirement purposes, which increases final salary for retirement computation; employees do not pay tax on this amount; and their gross pay is not reduced by a CaIPERS retirement contribution. For employers, paying the EPMC has allowed the City to add a benefit for employees r Mayor and City Council August 2, 2011 Page 2 of 2 without increasing their salary and associated benefit costs, as well as help the City to remain competitive with other employers in the area who also have historically picked up this cost in order to recruit qualified candidates. Due to drastic changes in the economy, local governments are making changes to pension plans and restructuring pension plan costs in order to reduce costs and long term pension obligations. One common change is related to the EPMC benefit which would require new hires to pick up the employee share of their pension costs. By taking this action, the City is now keeping up with current market trends. The City Council has also expressed a desire to preserve these benefits for existing employees. Therefore, staff proposes existing employees be grandfathered into the EPMC benefit, with new employees hired on or after August 3, 2011, pay the full employee share of the pension costs. FISCAL IMPACT Adopting Resolution No. 6785 will result in cost savings to the City. For all new safety employees hired on or after August 3, 2011, the City will not be paying the employee's cost share of the California Public Employees' Retirement System (CaIPERS). For safety employees, the savings will be nine percent (9%) of salary per employee. This cost savings will be immediate with each new employee and will increase over time as turnover and/or retirements occur and new employees are hired. RECOMMENDATION It is recommended that the City Council: Adopt Resolution No. 6785 for Paying and Reporting the Value of Employer Paid Member Contributions (Safety Employees). APPROVED: fie ./. Donald Penman, City Manager RESOLUTION NO. 6785 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, FOR PAYING AND REPORTING THE VALUE OF EMPLOYER PAID MEMBER CONTRIBUTIONS (SAFETY EMPLOYEES) WHEREAS, the City Council of the City of Arcadia has the authority to implement Government Code Section 20636(c)(4) pursuant to Section 20691; and WHEREAS, the City Council of the City of Arcadia has a written policy or agreement which specifically provides for the normal member contributions to be paid by the employer, and reported as additional compensation; and WHEREAS, one of the steps in the procedures to implement Section 20691 is the adoption by the City Council of the City of Arcadia of a Resolution to commence paying and reporting the value of said Employer Paid Member Contributions (EPMC) pursuant to CCR title 2 Section 571(a)(1); and WHEREAS, the City Council of the City of Arcadia has identified the following conditions for the purpose of its election to pay EPMC: • This benefit shall apply to all employees of the sworn Police and Fire Management, Police Chief, Fire Chief, Arcadia Firefighters' Association, and Arcadia Police Officers' Association designated by the City's Fringe Benefit Resolution and related amendments. • The benefit shall consist of paying 9% of the normal member contributions as EPMC, and reporting the same percent (value) of compensation earnable (excluding Government Code Section 20636(c)(4)) as additional compensation for those employees hired before August 3, 2011, and 0% of 1 the normal member contributions for those employees hired on or after August 3, 2011. • This Resolution shall become effective immediately upon its adoption. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARCADIA, DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS: SECTION 1. The City Council of the City of Arcadia elects to pay and report the value of EPMC, as set forth above. SECTION 2. This Resolution shall become effective immediately upon its adoption. SECTION 4. That the City Clerk shall certify to the adoption of this Resolution. Passed, approved and adopted this day of August, 2011. Mayor of the City of Arcadia ATTEST: City Clerk APPROVED AS TO FORM: vge,„, P 4 Stephen P. Deitsch City Attorney 2