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HomeMy WebLinkAboutItem 2c: Resolution 6787 - Paying and Reporting Value of Employer Paid Member Contributions Off' ARC ,c) - t„.„, � eb .n�Rjnity o�tto°, STAFF REPORT Administrative Services Department DATE: August 16, 2011 TO: Mayor and City Council l FROM: Hue C. Quach, Administrative Services Director �l/� Michael A. Casalou, Human Resources Administrator SUBJECT: Adopt Resolution No. 6787 Concerning Paying and Reporting the Value of Employer Paid Member Contributions (Miscellaneous Employees) Recommendation: Adopt SUMMARY Staff recommends adoption of Resolution No. 6787 allowing grandfathering of miscellaneous employees for payment and reporting of the employer paid member contributions hired prior to August 17, 2011. Miscellaneous employees hired on or after August 17, 2011 will pay their full employee share, or seven percent (7%), 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 based on the retirement formula selected by each agency. The current formula for miscellaneous employees sets the employee portion at eight percent (8%) of an employee's salary. 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 seven percent (7%) 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 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. Mayor and City Council August 16, 2011 Page 2 of 2 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 miscellaneous employees hired on or after August 17, 2011, paying the full employee share of the pension costs. At the time of the submission of this report, staff has not reached an agreement with one of the three Miscellaneous bargaining units (APCEA). Should agreement be reached for a new MOU, version "A" of Resolution No. 6787 will be presented for adoption which provides for the City to continue paying 7% of the member contribution for existing employees and reporting that value as special compensation (EPMC) and requiring new employees to pay the full member contribution. Should agreement not be reached and the City Council imposes the City's Last Best Offer, version "B" of Resolution No. 6787 would be presented for adoption which requires all APCEA members (irrespective of when hired) to pay the full 8% member contribution, and thus 0% EPMC is reported as special compensation. If the Impasse is continued to a future meeting or the City Council directs staff to continue negotiating, this item will be pulled from the agenda until such time where adoption can take place. FISCAL IMPACT Adopting Resolution No. 6787 will result in cost savings to the City. For all new miscellaneous employees hired on or after August 17, 2011, the City will not be paying the employee's cost share of the California Public Employees' Retirement System (CaIPERS). For miscellaneous employees, the savings will be seven percent (7%) of salary per employee (assuming the City Council adopts a 2nd Tier Retirement Formula of 2% @ 60). 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. 6787 for Paying and Reporting the Value of Employer Paid Member Contributions (Miscellaneous Employees). APPROVED: Donald Penman, City Manager VERSION "A" RESOLUTION NO. 6787 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, FOR PAYING AND REPORTING THE VALUE OF EMPLOYER PAID MEMBER CONTRIBUTIONS (MISCELLANEOUS 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 City employees that are members of the Arcadia City Employees Association (ACEA), Arcadia Police Civilian Employees Association (APCEA), and Arcadia Public Works Employees Association (APWEA). This benefit shall also apply to non-safety Management employees, non-safety Executive Management employees, Unrepresented Confidential employees, and members of the City Council as identified in the City's Fringe Benefit Resolution and related amendments. • The benefit shall consist of paying seven percent (7%) 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 17, 2011, and zero percent (0%) of the normal member contributions for those employees hired on or after August 17, 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 3. 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: 41_ar,ix Stephen P. Deitsch City Attorney VERSION "B" RESOLUTION NO. 6787 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, FOR PAYING AND REPORTING THE VALUE OF EMPLOYER PAID MEMBER CONTRIBUTIONS (MISCELLANEOUS 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 City employees that are members of the Arcadia City Employees Association ("ACEA"), Arcadia Public Works Employees Association ("APWEA"), and Arcadia Police Civilian Employees Association ("APCEA"). This benefit shall also apply to non-safety Management employees, non-safety Executive Management employees, Unrepresented Confidential employees, and members of the City Council as identified in the City's Fringe Benefit Resolution and related amendments (collectively, "Unrepresented Employees"). • The benefit shall consist of paying seven percent (7%) 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 ACEA members, APWEA members, and Unrepresented Employees hired before August 17, 2011, and zero percent (0%) of the normal member contributions for employees hired on or after August 17, 2011, and all APCEA members irrespective of when hired. • 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 3. 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: p 4.6ad Stephen P. Deitsch City Attorney