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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