SR-602-003 (28)
f:\person:misc/council\council59Sect21548-21574misc.doc Santa Monica, California
Council Meeting: September 14, 2004
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 to provide
Section 21548 (Pre-Retirement Optional Settlement 2 Death Benefit) and
Section 21574 (Fourth Level of 1959 Survivor Benefit) for Local
Miscellaneous Members only 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 Benefit) for local miscellaneous members only, to be paid for by the
employees. 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
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
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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 miscellaneous employees in
addition to City-paid life insurance.
As a part of a recent Memorandum of Understanding (umbrella agreement) negotiated
between the City of Santa Monica and the Administrative Team Associates, Municipal
Employees Association, Management Team Associates, Public Attorneys? Legal
Support Staff Union, Public Attorneys Union, Supervisory Team Associates, United
Transportation Union, Executive Pay Plan, and Rent Control Board, the City agreed to
amend its contract with CalPERS to provide this death benefit and survivor benefit for
local miscellaneous members. Per their MOU, the local miscellaneous members will
pay any additional costs that result from these amendments.
DISCUSSION
Amending the CalPERS contract for local miscellaneous members to provide
Section 21548 (Pre-Retirement Optional Settlement 2 Death Benefit) increases the
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present value of the retirement plan benefits by $2,306,843 and increases the accrued
liability of the plan by $1,519,984. These changes will increase the City?s employer
contribution rate by 0.290%. 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 13.323% to 13.613% for FY2004/05. The
miscellaneous bargaining units, Executive Pay Plan members and Rent Control Board
units have agreed that their members will cover the additional cost of contracting for the
enhanced benefits through payroll deductions. The amount to be reimbursed by
covered employees will be 0.290% of the employee?s compensation on which the City is
required to make contributions to CalPERS.
Amending the CalPERS contract for local miscellaneous members to provide Section
21574 (Fourth Level of 1959 Survivor Benefits) will result in additional costs to the City
that the miscellaneous bargaining units, Executive Pay Plan members and Rent Control
Board employees have agreed to have their 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 Third Level of 1959
Survivor Benefits is $0.60 per month per covered member. The employer normal cost
for the Fourth Level of 1959 Survivor Benefits is $4.90 per month per covered member.
The change from Level 3 to Level 4 of the 1959 Survivor Benefit will result in an
increased cost to the City of $4.30 per month per covered member. 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 $103,711 per year for the next 5 years, which equates to an additional $5.86 per
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employee per month for the next 5 years. Thus, each covered employee will contribute
a total of $10.16 per month for the first 5 years to cover the cost of the enhanced
benefits. At the end of 5 years, the employee reimbursement amount will be reduced
from $10.16 to $4.30 per month.
BUDGET/FINANCIAL IMPACT
The recommendations presented in this report do not have any net budget or financial
impact to the City as, per the memoranda of understanding, the employees will
reimburse the City the cost of this benefit.
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
miscellaneous 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
See adopted Resolution No.9975 (CCS)
Ordinance Authorizing an Amendment to the CalPERS Contract
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