HomeMy WebLinkAboutItem 3a: Resolution No. 6840 and Ordinance No. 2301 amending contract with PERSz, !V��z
4 74.-
.Mldid
DATE: August 7, 2012
TO: Honorable Mayor and City Council
STAFF REPORT
Administrative Services Department
FROM: Hue C. Quach, Administrative Services Director
Michael Casalou, Human Resources Administrator
By: Heather McDowell, Senior Human Resources Analyst m
SUBJECT: RESOLUTION NO. 6840, 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 ARCADIA, ADDING
SECTION 21548 PRE - RETIREMENT OPTIONAL SETTLEMENT 2W
DEATH BENEFIT
Recommendation: Adopt
ORDINANCE NO. 2301, AUTHORIZING AN AMENDMENT TO THE
CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF
ARCADIA AND THE BOARD OF ADMINISTRATION OF THE
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM, ADDING
SECTION 21548 PRE - RETIREMENT OPTIONAL SETTLEMENT 2W
DEATH BENEFIT
Recommendation: Introduce
SUMMARY
The City of Arcadia has contracted with the California Public Employees' Retirement
System (hereinafter "CaIPERS ") since 1945 to provide retirement benefits for eligible
City employees. CaIPERS offers various survivor benefits that can be adopted by a
local agency. This staff report addresses the current survivor benefits the City of
Arcadia contracts for and recommends adding a new survivor benefit that protects
spousal benefits of employees who have met retirement age, but who are still actively
working.
It is recommended that the City Council Adopt Resolution No. 6840, a Resolution of
Intention, to approve an amendment to the contract between the City of Arcadia and
CaIPERS, to add the Pre - Retirement Optional Settlement 2W Death Benefit, and to
Introduce Ordinance No. 2301, authorizing the amendment to the contract.
Resolution of Intent &
Introduction of Ordinance
August 7, 2012
Page 2 of 5
BACKGROUND
On October 4, 2011, the City Council directed staff to determine whether the collective
bargaining units would agree to share equally with the City the cost to amend the
CalPERS contract to achieve the full benefit for a spouse. If so, then the City Council
directed staff to proceed with a contract amendment to cover the benefit.
On January 4, 2012, the City Manager, Administrative Services Director, and Human
Resources Administrator met with the bargaining units to discuss the proposed contract
amendment and the proposed cost sharing agreement.
With the approval of all bargaining units to obtain additional cost information from
CalPERS, on March 20, 2012, staff updated the City Council and received authorization
to seek the actuarial valuations from CalPERS.
Since that meeting, actuarial cost information has been received and final approval from
all bargaining units on the cost sharing agreement has been received.
DISCUSSION
The City of Arcadia's contract with CalPERS is divided into three groups (local fire, local
miscellaneous, and local police) for retirement benefits. Examples of items that are
included in our contract with CalPERS are cost of living increases, eligible age for
retirement, retirement formulas, final compensation, credit for unused sick time, the
ability to buy back military service credit, and survivor benefits.
CalPERS offers a survivor benefit referred to as a Pre - Retirement Option 2W Death
Benefit which allows the spouse or domestic partner of a deceased member, eligible to
retire for service at the time of death, to elect the Pre - Retirement Option 2W Death
Benefit in lieu of the lump sum Basic Death Benefit or a much lower monthly allowance.
The 2W death benefit is a monthly allowance equal to the amount the member would
have received if he /she had retired for service on the date of death and elected Option
2W, the highest monthly allowance a member can leave a spouse or domestic partner.
The City does not presently contract for the Pre - Retirement Option 2W Death Benefit.
Without this amendment, if an age eligible employee passes away, their spouse
receives a reduced benefit of either the Basic Death Benefit (return of the member's
contributions and interest, plus an amount equal to one month's average earnings for
each year of credited services up to six months) or 1957 Survivor Benefit (a monthly
allowance to a surviving spouse, registered domestic partner or minor child equal to half
of the highest service retirement benefit payable had the member retired prior to the
date of death; plus the 1959 Survivor Benefit (a monthly allowance to eligible survivors
(a spouse age 62 or older if they care for an eligible child; unmarried child under age 22;
Resolution of Intent &
Introduction of Ordinance
August 7, 2012
Page 3of5
a parent if no eligible survivors and the parent was dependent on the member for at
least half of their support).
The City of Arcadia has had two employees pass away in the last few years who were
retired in a hasty fashion in order to preserve their surviving spouse's benefits under
CalPERS. These unfortunate situations have made apparent the disparity in spousal
benefits under our existing contract with CaIPERS. There is not always time to retire an
employee prior to death. The City has also had a handful of employees retire earlier
than expected fearing death and leaving their spouse unprotected. A solution to this
dilemma is to add the Pre - Retirement Option 2W Death Benefit to the City's contract
with CalPERS and preserve spousal benefits of age eligible active employees. Within
our current workforce, approximately 39% of the City's full -time and permanent part-
time employees are age 50 or above.
Below is a comparison between the benefits a surviving spouse or domestic partner
would receive with and without the 2W Death Benefit, assuming age 55 with 25 years of
service at the time of death:
Highest Salary:
Retirement Formula:
Years of Service:
Annual Benefit:
1957 Survivor Benefit
$ 60,000
3% at 55
25
$ 22,500
(maximum benefit = 1/2 of
unmodified allowance)
2W Death Benefit
$ 60,000
3% at 55
25
$ 45,000
(member's benefit)
The 2W Death Benefit provides the highest benefit available to the spouse of a
member. The difference between spousal benefits from these two scenarios is
substantial. Without the 2W Death Benefit, the spouse would be left with a maximum
benefit of one half of what the employee would have been eligible for at the time of
death.
The City is anticipating the following schedule for implementation:
August 7, 2012 Adoption of the Resolution of Intention and
Introduction of the Ordinance
September 4, 2012 Adoption of the Ordinance
October 7, 2012 Effective Date of Pre - Retirement Option 2W
Death Benefit
All of the City's bargaining groups have agreed to share in the cost of this contract
amendment, and side letter agreements have been executed by each group for the cost
Resolution of Intent &
Introduction of Ordinance
August 7, 2012
Page 4 of 5
sharing arrangement. In order to implement the Pre - Retirement Option 2W Death
Benefit, the City Council must adopt a Resolution of Intention to approve the
amendment, and introduce and subsequently adopt an Ordinance authorizing the
amendment between the City of Arcadia and CalPERS.
FISCAL IMPACT
The contract amendment cost analysis (actuarial valuation) has been completed based
on the most recent annual valuation. Disclosure of the future annual costs of the
proposed contract amendment must be made public at a public meeting at least two
weeks prior to the adoption of the final Ordinance. By disclosing this cost at the
August 7, 2012, City Council meeting, this requirement is met.
2W Death Benefit Cost
Benefit Proj ected Cost
Bargaining Group
Annual
Miscellaneous
Safety
Total Plan Assets
$11,820.05
$65,869,370
$99,258,439
Change in the Present Value of Benefits
$10,062.88
$ 335,391
$ 298,675
Change in the Accrued Liability
$ 3,356.33
$ 236,572
$ 198,272
Change in the Total Employer Rate
$13,120.15
.276%
.220%
* The change in the total employer rates represents $60,510 for Fiscal Year
2012 -13. CalPERS has also informed staff that those rates for this benefit are
set for a 20 year period.
The annualized cost to the City is estimated to be $25,757 from the General Fund and
$4,498 from various other funds. A summary of estimated costs based on FY 2012 -13
salary information is provided:
2W Death
Benefit Proj ected Cost
Bargaining Group
Annual
Ci 50%
Employee 50%
ACEA
$11,820.05
$5,910.03
$5,910.03
AFFA
$10,062.88
$5,031.44
$5,031.44
APCEA
$ 3,356.33
$1,678.17
$1,678.17
APOA
$13,120.15
$6,560.08
$6,560.08
APWEA
$ 6,713.71
$3,356.86
$3,356.86
CM
$ 551.03
$ 275.52
$ 275.52
ELECTED OFFICIALS
$ 99.36
$ 49.68
$ 49.68
EXEC MGMT NON - SAFETY
$ 2,086.37
$1,043.19
$1,043.19
EXEC MGMT SAFETY
$ 793.28
$ 396.64
$ 396.64
MGMT NON - SAFETY
$ 8,154.25
$4,077.13
$4,077.13
MGMT SAFETY
$ 3,214.82
$1,607.41
$1,607.41
UNREP
$ 538.70
$ 269.35
$ 269.35
TOTAL
$60,510.93
$30,255.47
$30,255.47
Resolution of Intent &
Introduction of Ordinance
August 7, 2012
Page 5 of 5
In order to implement a contract amendment with CalPERS, the agency is required to
obtain an actuarial analysis of the cost for the amendment. This analysis has been
conducted and the cost for the amendment is .276% of salary for the non - safety
employees and .220% of salary for safety employees. The City bargaining groups
(ACEA, AFFA, APCEA, APOA, and APWEA) have agreed to share in the cost of this
amendment, thereby cutting the realized cost to the City in half. The FY 2012 -13 total
cost is estimated to be $60,510, split between the City and City employees based on
salary.
RECOMMENDATION
It is recommended that the City Council amend its contract with CalPERS to include the
Pre - Retirement Optional Settlement 2W Death Benefit provided under Section 21548 of
the Government Code and appropriate funds in the amount of $25,757 to cover the
increased CalPERS costs from the General Fund and $4,500 from various other funds.
It is further recommended that the City Council adopt Resolution No. 6840, a 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 Arcadia;
and
Introduce Ordinance No. 2301, authorizing an amendment to the contract between the
City Council if the City of Arcadia and the Board of Administration of the California
Public Employees' Retirement System.
Approved:
o inic Lazzar
City Manager
Attachments: Resolution No. 6840 Resolution of Intent
Ordinance No. 2301
RESOLUTION NO. 6840
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 ARCADIA
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 21548 (Pre- Retirement Option 2W
Death Benefit) for local miscellaneous members and local
safety members.
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.
Date adopted and approved
(Amendment) CaIPERS ID# 1676318862
CON -302 (Rev. 4/96)
Presiding Officer
Title
ORDINANCE NO. 2301
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
ARCADIA, CALIFORNIA, AUTHORIZING AN AMENDMENT TO THE
CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF
ARCADIA AND THE BOARD OF ADMINISTRATION OF THE
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
REGARDING PRE - RETIREMENT OPTIONAL SETTLEMENT 2W
DEATH BENEFITS
THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, DOES
ORDAIN AS FOLLOWS:
SECTION 1. An amendment to the contract between the City Council of the
City of Arcadia 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 Council is hereby authorized, empowered,
and directed to execute said amendment for and on behalf of said Agency.
SECTION 3. This Ordinance shall be implemented on October 7, 2012.
SECTION 4. The City Clerk shall certify to the adoption of this Ordinance and
shall cause a copy of same to be published in the official newspaper of the City of
Arcadia within fifteen (15) days after its adoption. This Ordinance shall take effect on
the thirty -first (31S) day after its adoption.
1
Passed, approved and adopted this day day of '2012.
ATTEST:
City Clerk
APPROVED AS TO FORM:
Stephen P. Deitsch
City Attorney
2
Mayor of the City of Arcadia
Ca1PERS
California
Public Employees' Retirement System
EXHIBIT
AMENDMENT TO CONTRACT
Between the
Board of Administration
California Public Employees' Retirement System
and the
City Council
City of Arcadia
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
October 1, 1945, and witnessed September 24, 1945, and as amended effective July 1,
1953, January 1, 1957, January 1, 1958, January 1, 1959, January 19, 1964, February
28, 1965, October 1, 1972, June 24, 1973, January 4, 1976, April 10, 1977, March 11,
1979, June 22, 1986, November 6, 1988, December 2, 1994, June 4, 1999, October 11,
1999, December 8, 1999, October 19, 2001, March 5, 2004, September 28, 2008 and
October 9, 2011 which provides for participation of Public Agency in said System, Board
and Public Agency hereby agree as follows:
A. Paragraphs 1 through 16 are hereby stricken from said contract as executed
effective October 9, 2011, and hereby replaced by the following paragraphs
numbered 1 through 16 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 entering membership in
the miscellaneous classification on or prior to October 9, 2011, age 60 for
local miscellaneous members entering membership for the first time in the
miscellaneous classification after October 9, 2011, age 50 for local safety
members entering membership in the safety classification on or prior to
October 9, 2011 and age 55 for local safety members entering
membership for the first time in the safety classification after October 9,
2011.
EXHIBIT ".A"
2. Public Agency shall participate in the Public Employees' Retirement
System from and after October 1, 1945 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:
NO ADDITIONAL EXCLUSIONS
6. The percentage of final compensation to be provided for each year of
credited prior and current service for local miscellaneous members in
employment before and not on or after September 28, 2008 shall be
determined in accordance with Section 21354 of said Retirement Law,
subject to the reduction provided therein for service prior to March 31,
1977, termination of Social Security, for members whose service has been
included in Federal Social Security (2% at age 55 Full and Modified).
7. The percentage of final compensation to be provided for each year of
credited prior and current service for local miscellaneous members in
employment on or after September 28, 2008 and not entering membership
for the first time in the miscellaneous classification after October 9, 2011
shall be determined in accordance with Section 21354.4 of said
Retirement Law, subject to the reduction provided therein for service prior
to March 31, 1977, termination of Social Security, for members whose
service has been included in Federal Social Security (2.5% at age 55 Full
and Modified).
8. 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
October 9, 2011 shall be determined in accordance with Section 21353 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 local safety members entering
membership in the safety classification on or prior to October 9, 2011 shall
be determined in accordance with Section 21362.2 of said Retirement Law
(3% at age 50 Full).
10. The percentage of final compensation to be provided for each year of
credited current service as a local safety member entering membership for
the first time in the safety classification after October 9, 2011 shall be
determined in accordance with Section 21363.1 of said Retirement Law
(3% at age 55 Full).
11. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 21573 (Third Level of 1959 Survivor Benefits) for local
miscellaneous members and local police members only.
b. Section 20042 (One -Year Final Compensation) for those local
miscellaneous members and local safety members entering
membership on or prior to October 9, 2011.
C. Section 20965 (Credit for Unused Sick Leave).
d. Sections 21624 and 21626 (Post- Retirement Survivor Allowance).
e. Section 21024 (Military Service Credit as Public Service).
Section 21574 (Fourth Level of 1959 Survivor Benefits) for local fire
members only.
g. Section 21027 (Military Service Credit for Retired Persons).
h. 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 October 9, 2011.
21363.1 (3% @ 55 Full formula) and Section 20037 (Three -Year
Final Compensation) are applicable to local safety members
entering membership for the first time in the safety classification
after October 9, 2011.
Section 21548 (Pre- Retirement Option 2W Death Benefit).
12. Public Agency, in accordance with Government Code Section 20790,
ceased to be an "employer" for purposes of Section 20834 effective on
April 10, 1977. 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 and local police 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 fire 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 ARCADIA
BY
KAREN DE FRANK, CHIEF
CUSTOMER ACCOUNT SERVICES DIVISION
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
AMENDMENT CaIPERS ID #1676318862
PERS- CON -702A
BY
PRESIDING OFFICER
Witness Date
Attest:
Clerk