SR-6-J (24)
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PE:KLB:kb/cc4.bancroft.pms Santa Monica,
council Meeting: December 17, 1991
TO: Mayor and Council
FROM: city Staff
SUBJECT: Recommendation to Adopt Resolution to Establish a
Retirement Plan for As-Needed (Temporary) City
Employees
INTRODUCTION
This report requests the Council adopt the attached resolution
establishing a retirement plan for as-needed (temporary) city
employees.
BACKGROUND
The federal Omnibus Budget Reconciliation Action of 1990
(OBRA'90) contained a significant change in the application of
Social Security retirement and Medicare coverage to state and
local government employees. Under OBRA 190, government employees
who are not covered by a public retirement system will be covered
by the Social Security system. "Public retirement system" is
broadly defined by OBRAI90 to include most types of pension or
retirement programs, including the state PUblic Employee
Retirement system (PERS) as well as locally sponsored plans.
OBRA'90 requires that said employees be covered by a qualified
retirement plan as of January 1, 1992. 6
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DISCUSSION
At this time, City of Santa Monica as-needed City employees are
not covered by Social security retirement, PERS or a locally
sponsored retirement plan. OBRA'90 requires that local
government employees not covered by a public retirement system be
covered by either Social Security retirement or a locally
sponsored plan as of the first day of employment.
The PERS regulations require that a local government employee
work for a minimum periOd of time before hel she can become
eligible for coverage by PERS. Thus, PERS would not be an option
for meeting the requirements of OBRA'90.
If the City were to elect to cover its as-needed employees with
Social Security retirement, both the city as well as the
as-needed employee would be required to contribute 6.2% of the
employee's wages to Social security. It was determined that a
6.2% contribution to social Security of wages earned could place
a financial burden on as-needed employees.
The City engaged the services of its employee benefits
consultant, William M. Mercer, Inc. , to prepare a report
analyzing the financial impact and feasibility of adopting a
locally sponsored retirement plan alternative to Social Security.
The federal regulations outlined the type of plan that would be
considered a "qualifying retirement system" for purposes of
providing a benefit comparable to Social Security.
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Based on the analysis conducted by William M. Mercer, Inc., which
included an actuarial valuation of the City's as-needed employee
population, Mercer recommended that the City adopt a defined
benefit style retirement plan for its as-needed employees. For
ease of administration, Mercer also recommended that the city pay
a one-time lump-sum to participants when they terminate their
employment with the City of Santa Monica as opposed to paying an
annui ty to the employee once the employee reaches age 65. The
cost of such a retirement plan would be approximately 2% of the
total payroll for as-needed employees.
BUDGET/FISCAL IMPACT
The funds required to implement the above-recommended retirement
plan for as-needed City employees have been included in the
current budget.
RECOMMENDATION
It is recommended that City Council adopt the attached Resolution
establishing a retirement plan for as-needed city employees to
comply with Treasury Regulations 31.312(b) (7)-2.
Prepared By: Karen L. Bancroft
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BEFORE DISTRIBUTION CHECK CONTENT OF ALL FOQ CITY CLE~K'S ACTIO~
. DIS-TF.IBUTION OF RESOLUTION 1 i 3:5S-- ORDINANCE f
Council Meeting Date /~~? /~ I Introduced:
Agenda Item. r; ~r ' Adopted:
No ALWAYS PUBLISH ADOPTED OFnINANCE
Was it amended? Cross out Attorney's approval
VOTE: Affirmative: 7-0 -
Negative:
Abstain: t
Absent:
PROOF VOTES WITH ANOTHER PERSON BEFORE ANYTHING
DISTRIBUTION: ORIGINAL to he signed, sealed and f11ed in Vault.
NEWSPAPER PUBLICATION (Da te : )
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D~partment originating staff report ( Laurie L2eberman}
Ordinances only for Attorney ( Claudia Thompson) 2
Management Services Lynne Barrette ORDINANCES ONLY 1
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Agency ment~oned 1n document or staff report
. ~certlfled?)
Subject file (agenda packet) 1
Counter file 1
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Others: (Review for departments who need to know) .
Airport parJsing Auth.
Auditorium Personnel I
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Building Dept. Planning
ClEO Police
Finance Purchasing
General Servo Recr!Parks
Library TransportatJ..on
Manager Treasurer
Fire
SEND FOUR COP~~S OF ALL ORDINANCES TO:
CODED SYSTEMS 4
120 Main Street
Avon, New Jersey 07717
SEND FOUR COPIES OF ALL ORDINANCES TO: 4
Debra Myrick
Santa HonJ..ca Municipal Court
1725 Main Stree~, Room 118 -)
Santa Monica, CA 90401 Total Copies
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. CA:RMM:LBC:lbc115
city council Meeting 12-17-91 Santa Monica, california
RESOLUTION NO. 8335 (CCS)
CITY COUNCIL SERIES
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF SANTA MONICA ADOPTING
liTHE CITY OF SANTA MONICA AS NEEDED
RETIREMENT PLAN" (EFFECTIVE JANUARY 1, 1992)
WHEREAS, the City is desirous of establishing a Retirement
Plan for the benefit of certain employees who are not members of
another qualified retirement system as defined in Internal
Revenue Code section 3121(b) (7) (F) and regulations thereunder;
WHEREAS, the Retirement Plan will be establ ished to comply
with Treasury Regulations 31. 3121 (b) (7)-2 as a qualified
retirement system;
WHEREAS, the Retirement Plan shall provide an annual normal
retirement benefit to eligible employees of the City equal to 2%
of their total W-2 earnings with the city for covered service up
to 30 years (or the lump sum actuarial equivalents upon
termination of employment);
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:
SECTION l. liThe c~ty of Santa Mon~ca As Needed Employees
Retirement Planll (the "Plan") shall be adopted, to become
effective as of January 1, 1992.
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. The appropriate officers of the City are hereby
SECTION 2. authorized and dlrected to execute such documents and to perform
such acts (including adoption of amendments required by the
Internal Revenue Service as a precondition to the issuance of a
favorable Private Letter Ruling with respect to the Plan), as
they, in their judgment, deem necessary or desirable to
effectuate the lntent of thlS resolution, the implementation of
the Plan, and to secure from the Internal Revenue Service a
Private Letter Ruling to the effect that "the Plan" constitutes
an eligible deferred compensation plan under section 457 of the
Internal Revenue Code of 1986, as amended.
SECTION 3. The City Clerk shall certify the adoption of
this Resolution an thenceforth and thereafter the same shall be
in full force and effect.
APPROVED AS TO FORM:
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ROBERT M. MYERS
City Attorney
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Adopted and approved this 17th day of December, 1991-
I hereby certify that the foregoing Resolution No. 8335 (CCS)
was duly adopted by the city Council of the City of Santa Monica
at a meeting thereof held on December 17, 1991 by the following
Council vote:
Ayes: Councilmembers: Abdo, Holbrook, Katz, Olsen,
Vazques, Zane, Genser
Noes: councilmembers: None
Abstain: Councilmembers: None
Absent: Counc~lmembers: None
ATTEST:
~f/d1~
~- Ci ty Clerk /