SR-602-003 (20)
f:\person:misc/council\council59Sect21548-21574fire.doc Santa Monica, California
Council Meeting: July 22, 2003
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Resolution of Intention to Amend Contract Between the California Public
Employees' Retirement System and the City of Santa Monica and a Public
Hearing and First Reading of an Ordinance to Amend Said Contract
INTRODUCTION
This report requests that Council adopt the attached resolution stating its intent to
approve an amendment to the contract between the California Public Employees?
Retirement System (CalPERS) and the City of Santa Monica to provide Section 21548
(Pre-Retirement Optional Settlement 2 Death Benefit) and section 21574 (Fourth Level
of 1959 Survivor Benefits) for local fire members only. These benefits were negotiated
by the Santa Monica Firefighters Local 1109 IAFF as a part of their last contract. Per
their Memorandum of Understanding, the local fire members will pay any additional
costs that result from these amendments. The attached resolution and agreement
comply with the procedure required by CalPERS. This report also requests that Council
hold a public hearing and first reading of the ordinance to amend said contract as
indicated. The ordinance is also attached.
BACKGROUND
The City of Santa Monica contracts with CalPERS to provide retirement plans for
permanent employees. As a contracting agency, the City may amend its contract(s) to
provide various optional benefits offered by CalPERS. The Pre-Retirement Optional
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Settlement 2 Death Benefit allows the spouse of a member, who dies before retirement
but who was eligible to retire for service at the time of death, to elect an alternative to
the lump sum Basic Death Benefit. The alternative provides 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 the highest monthly allowance a member can leave a spouse.
The 1959 Survivor Benefit option is an additional CalPERS benefit which contracting
agencies can offer to employees who are not covered by Social Security. The 1959
Survivor Benefit option is modeled after the Social Security program in that it provides a
monthly benefit to the families of CalPERS members who die prior to retirement. As
Social Security benefits improved over the years, CalPERS has modified the 1959
Survivor Benefit option by providing additional benefit levels. The Fourth Level provides
a monthly payment of up to $2,280 per month to the CalPERS member?s family
whereas the Third Level provides the family with up to $840 per month. The City
currently offers the Third Level of 1959 Survivor Benefit to fire employees in addition to
City-paid life insurance.
As a part of the most recent Memorandum of Understanding (MOU) negotiated between
the City of Santa Monica and the Santa Monica Firefighters Local 1109 IAFF, the City
agreed to amend its contract with CalPERS to provide Section 21548 (Pre-Retirement
Optional Settlement 2 Death Benefit) and Section 21574 (Fourth Level of 1959 Survivor
Benefits) for local fire members only. Per the terms of the MOU, the employees will pay
any additional costs that result from the two CalPERS contract amendments.
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DISCUSSION
Amending the CalPERS contract for local fire members only to provide Section 21548
(Pre-Retirement Optional Settlement 2 Death Benefit) increases the present value of the
retirement plan benefits by $48,000 and increases the accrued liability of the plan by
$35,408. These changes will increase the City?s employer contribution rate by 0.049%.
As a result, the net impact on the total City contribution rate (employer rate plus the
employee contribution paid by the City) will be to increase the City?s contribution rate
from 28.051% to 28.100% for FY2003/04. In exchange for the increased retirement
benefit, the Santa Monica Firefighters Local 1109 IAFF has agreed to have its members
pay for the additional cost.
Amending the CalPERS contract for local fire members only to provide Section 21574
(Fourth Level of 1959 Survivor Benefits) will result in additional costs to the City that the
Santa Monica Firefighters Local 1109 AFF has agreed to have its members pay in
exchange for the increased retirement benefits. Members covered by the 1959 Survivor
Benefits contribute $2.00 per month. The employer normal cost for the Fourth Level of
1959 Survivor Benefits is $5.00 per month per covered member. The $5.00 per month
per member employer contribution is an increased cost to the City. In addition, the
contract amendment will result in an unfunded liability that will be amortized by
CalPERS over the next 5 years, resulting in an additional employer cost in the amount
of $9,891 per year for the next 5 years.
BUDGET/FISCAL IMPACT
The recommendations presented in this report have no net budget or financial impact
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on the City. Under the terms of the Memorandum of Understanding between the City of
Santa Monica and the Santa Monica Firefighters Local 1109 IAAF, the Firefighter
members will reimburse the City for the full additional cost of these benefits. The
reimbursement will be done through bi-weekly payroll deductions. The reimbursements
by Firefighter members will include the on-going increase in the City?s total CalPERS
contribution rate (0.049% of all compensation subject to CalPERS contributions), the
on-going employer normal cost of Level 4 of the 1959 Survivor Benefit ($5.00 per month
per employee) and the unfunded liability associated with Level 4 of the 1959 Survivor
Benefit that will be paid to CalPERS in installments of $9,891 per year for the next 5
years.
RECOMMENDATION
It is recommended that the City Council adopt the attached resolution indicating its
intent to approve an amendment to the contract between CalPERS and the City of
Santa Monica to provide Section 21548 (Pre-Retirement Optional Settlement 2 Death
Benefit) and Section 21574 (Fourth Level of 1959 Survivor Benefits) for local fire
members only. It is further recommended that Council hold a public hearing and first
reading of the Ordinance to amend said contract.
Prepared By: Karen Bancroft, Director of Human Resources
Attachments: Resolution of Intention with Exhibit
Ordinance Authorizing an Amendment to the CalPERS Contract
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