SR-602-003 (34)~_
~ City of
Santa Monica
City Council Report
City Council Meeting: January 23, 2007
Agenda Item: ' ~-- --8
To: Mayor and City Council
From: Karen Bancroft, Director of Human Resources
Subject: Resolution of Intention to Amend Contract between the California Public
Employees' Retirement System and the City of Santa Monica to Provide
Section 21354.5 (2.7% @ 55 Full Formula} for Local Miscellaneous
Members; Hold a Public Hearing; and Introduction and First Reading of an
Ordinance to Amend Said Contract as fndicated
Recommended Action
This report recommends that Council
1. adopt the attached resolution stating its intent to approve an amendment to the
contract between the California Public Employees' Retirement System
(CaIPERS)and the City of Santa Monica to provide Section 21354.5 (2.7% @ 55
Full Formula) for local miscellaneous (non-safety) members;
2. hold a public hearing; and
3: introduce for first reading an ordinance to amend said contract.
Executive Summary
The City of Santa Monica contracts with CaIPERS 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 CaIPERS.
1
City of Santa Monica active local miscellaneous (non-safety) members of CaIPERS are
currently covered by a 2% @ 55 full formula. As a part of contract negotiations with the
City's miscellaneous (non-safety) bargaining units, the bargaining units requested that
the City amend its contract with CaIPERS to provide Section 21354.5 (2.7% @ 55 Full
Formula) for active local miscellaneous members.
At #he June 27, 2006 meeting, the City Council adopted a Resolution authorizing the
City Manager to execute a Memorandum of Understanding (MOU) with the City's
Miscellaneous (non-safety) bargaining units to amend the City's contract with CaIPERS
to provide the 2.7% @ 55 futl formula for active local miscellaneous employees under
Section 21354.5 of the California Government Code, effective as of June 1, 2007.
Under the terms of the MOU, the employees will reimburse the City for the additional
cost of this benefit through an after-tax payroll deduction. The employee
reimbursement to the City is being phased in, starting as of July 1, 2006.
Discussion
Based on the valuation prepared by CaIPERS, the implementation of the 2.7% @ 55
retirement formula would increase the City's CaIPERS contribution rate by 5.724% and
the employees' contribution rate by 1.0%.
The increase in the City's contribution rate includes the repayment of an unfunded
liability that covers retirement costs of employees who retire prior to the increased
2
benefit being fully funded. The payment of the unfunded liability, which results in an
increase to the City's Accrued Liability (AL), wili be amortized over 20 years by
CaIPERS and accounts for 3.586% of the 5.724% increase to the City's contribution
rate. At the end of 20 years, the unfunded liability will have been paid by the City,
resulting in a corresponding reduction in the City's Accrued Liability (AL) and the City's
CaIPERS contribution rate.
Since the City pays the employees' CaIPERS contributions on their behalf, per the
terms of the MOU between the City and its miscellaneous bargaining units,
miscellaneous employees will reimburse the City for the increase in the City's Ca1PERS
contribution rate and the employee's CaIPERS contribution rate resulting from the
amendment to the City's contract with CaIPERS to provide 2.7% @ 55 retirement
formula option for the City's miscellaneous (non-safety} employees.
fn order to amend the City's contract with CaIPERS to provide the 2.7% @ 55
retirement formula option for the City's miscel{aneous employees, the City Council must
1. adopt a Resolution of Intention to amend its contract with CaIPERS to provide
Section 21354.5 (2.7°l0 @ 55 full formula) for local miscellaneous members;
2. hold a public hearing; and
3. introduce for first reading an ordinance to amend said contract.
3
Since the effective date of the amendment to the City's contract with CaIPERS providing
the new CaIPERS retirement formula must coincide with the beginning of a payroll
period, the amendment will become effective May 27, 2007 since this is the payroll
period that covers June 1, 2007, the effective date set forth in the MOU between the
City and its miscellaneous (non-safety) bargaining units.
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 (CatPERS) and the City of Santa Monica to provide the 2.7% @ 55
full formula for active local miscellaneous employees under Section 21354.5 of the
California Government Code, effective as of May 27, 2007. The attached resolution and
agreement comply with the procedure required by CaIPERS. This report also requests
that Council hold a public hearing and introduce for first reading an ordinance to amend
said contract as indicated. The ordinance is also attached.
Budqet/Financial Impact
This change to the miscellaneous members' CaIPERS retirement plan increases the
present value of benefits (PVB), or total cost of the plan, from $427,719,548 to
$480,459,890, which is a net PVB increase of $52,740,342. This accounts for 2.138%
of the 5.724% increase in the City's contribution rate. The accrued liability (AL), which
includes the unfunded liability for the retirement costs of employees who retire prior to
the increased benefit (2.7% @ 55) being fully funded, will increase from $323,Q85,273
to $355,979,079, for a total net increase in the accrued liability (AL) of $32,893,806.
4
This net increase of $32,893,806 in the AL will be amortized over 20 years by CaIPERS
and will account for 3.586°10 of the 5.724% increase in the City's CaIPERS contribution
rate. At the end of 20 years, the unfunded liability resulting from the contract
amendment will have been paid by the City, resulting in a corresponding reduction in
the Accrued Liability and a corresponding reduction in the City's CaIPERS contribution
rate.
Per the terms of the MOU between the City and its miscellaneous bargaining units, the
amendment to the City's contract with Ca1PERS to provide Section 21354.5, 2.7°l0 @ 55
full formula for active local miscellaneous (non-safety) members only, will have no net
budget or financial impact on the City since the employees wi11 reimburse the City for
the total increase in the combined City and employee contributions to CaIPERS.
Prepared by: Karen Bancroft, Director of Human Resources
5
Approved: Forwarded to Council:
~~
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Caiifornia
Public Employe~s' ~etirement System
,~
~~NT~N~N'T TO C01~'T:I~.ACT
Be~wee~. the
Board of Adm~,~,a,stra~iozi
Cax~,~o,~z~~.a Public Eznployees • Retiremea~.t SXstem
arid t~e
C,ity Cou~cil
Cxty of Sa~nta 1+~lonica
~
l~he Board of Administration, Ca~ifomia Public Employees' Retirement System,
hereinafter referred to as Baard, and the governing body of the above public ag~ncy,
hereinafter referrec! to as Public Ag~ncy, having entered into a~:ontract effective July
~, 1944, and witness~d Aprii 5, 'i944, and as amended effe~:tive March 1, 1950,
~.eptember 1, '195"i , June `i , 1954, Nov~mb~r 1, 1980, Februar ~ 1, 1962, September
12, 1965, November 1, 1969, November 25, 1973, January 20, 1974, 'March 3, 197~4,
June 28, 1981, May 13, 1984, January 1, 9 992, April ~5, 199 3, January 12, '# 996,
.lanu~ry 15, 1999, November 13, 1999, Novmeber "E 9, 2L 00, April 28, 2001,
~~eptember 1 ~-, 2001, December 16, 2001, January 12, 2003, 3ept~mber 2'! , 2003,
h1ay 16, 2004 and November 1~4, 2004 which provides for F ar~icipation of Public
A,gency in said System, Board and Public Agency hereby agree as follows;
~,. Paragraphs 1 through 13 are hereby stricken from said contract as executed
e~fective November 14, 2004, and hereby r~place d by the following
paragraphs numbered 1 through 14 inclusive;
All words and terms used herein which are d efiin~d in the Public
Empfoyees' Retirement Law shall have the meani ~g as defined thErein
unless oth~rwise speci~icalfy provided. "Normaf retirement age" shall
mean age 55 for local miscellaneaus mem6ers, local fire members ancf
ocean beach lifeguards, and age 5o for Iocal palicE; members.
~LEA~E C~(~ ~10~ ~l~N "E~~~~~~ C~~~ ~Yp~
2_ F'ublic Agency ~hall p~rticipate in the Public ~ nployees' Retiren~ent
System from and after July 1, 1944 making its em ~loyees a~ her~inafter
provid~d, members of said Syst~m subjecfi to all provisions o~F the Public
Employees" R~tir~ment Law excepY such as appl, ~ only on election of ~
contrac~ing agency and are nat providecf fo - herein and to a(I
amendments to said Law hereafter ~n~cted ex,~pfi fiho~e, which by
express provisions thereof, apply only on the elE ctian of a con~ractfng
agency,
3. Emplvyees vf pubiic Agency in the following c lasses shall becom~
members af said Retirem~nt System except such in each such class as
are exclud~d by law or this agreement:
a. Local Fire Fighters (herein referred to as lo~;al safety rnembers);
b. Lacal Police Officers (herein referred to as local safety
members);
c. ocean Beach ~ifeguards (included as I~cal safety members);
d_ Employees ather than {ocal safefiy mernbE rs (herein referr~d to
as Iocal misc~llaneous members}.
4. In addi~ion to fihe classes of employees excluded from membership by
said Retirement Law, the following classes of employees shafl not
became member~ af said Retirement System:
NO ADDITIONAL, ~KC~USIONS
5. The percentage of final compensation to be pro~ ided ~For each year of
credited prior and current service as a local misc ellaneous member in
employment before and nofi on or after the E:ffective date of this
amendment to contract shall be determined in aa:ordance with Section
21354 of said Retirement ~,aw (2% at age 55 Full)
6. The percentage of final compensation to be pro~ ided for each year of
credited prior and currenfi service as a local misc ellaneous memb~r in
employment on or after the effective date 4f this a~endm~nt to contract
shall be defiermined in acco~dance with Sect on 21354.5 of said
R~tirement Law (2.7% at age 55 Full).
~J~~=~~~'~ ~,~~ ~~4~~ ~~~ ~~~~~~ ~d~~~f-~I~~~ ~~~~.~'~
7. The ~ereentage of ~ir~~l compensation to be pro~ ided for each year of
credited prior ~and current servic~ as an ocean be ach lifegu~rd shati be
determined in accordance with Section 2'f 366 of said Retirem~nt ~,aw
(On~-half pay at age 55 Full).
8. The percentage o~f final compensatian to be prov ided for eac~ year of
credited prior and curren~ s~rvice as a local pol ice member shall be
determined in accordance with Sectian 21362:2 o said Retirement Law
' (3% at age 50 Fuff},
9, Th~ perc~ntag~ af final compensation to be provided for each year of
credited prior and current service as a Ioca! f re member shall be
determined in accordance with Section 21363.1 01 said Retirement Law
(3% at age 55 Full).
10. Public A~ency elected anci elects to be subject to the following optional
provisions:
a. Section 20421 ("Loc~l Safefiy Member" shall include ocean
beach lifeguards of a city as descr~bed in Gavernmen# Gade
5ection 20421 }.
b. 5~ction 21571 (Basic Level of 1959 Surviv~ ~r Benefits} for ocean
beach lifeguards,
c. Section 21222.1 (One-Time 5% Incr~ase - 1970). Legislafiion
repealed said Section e~fective January 1, 1980.
d. Sections 21624 and 2'1626 (Post-f Zetirement Survivor
Allowance) for local police m~mbers and loc :al fir~ members only.
e. Section 20042 (One~Year Final Compens: ~tion) for Iocal police
members, local fire m~mbers. and local mi:,celianeous members
only.
~F. Section 21024 (Military Service Credit as Pi ~blic Service)_
g. Section 20903 (Two Years Additional Servi~;e Credit).
h, Secfiion 21574 (Fourth Level of 1959 Survi rar Benefts) for local
police members, focal fire members and local miscellaneous
members only.
~~~~:.~~ ~~ I V~J~ ~~l-C~ t~~~~~~~ 1 ~6 W~iY
Sec~ion 21548 ((~re-Retirement Optional Settlement 2 De~th
Bene~it) for focal fire m~mbers and local mi~cellaneous members
anly.
Section 20434 ("~.ocal Fire Fighter" shall include any officer or
employee of a fire departrn~nt ~mployed 1 o perform firefighting,
fire pr~vention, fire training, hazarclous ~ naterials, emergency
medicaf services, or fire ar ~rson inv~;tigation services as
described in Government Code 5ection 20~ ~34).
'11. Public Agency shalf contribute to said Ret rement System the
cantributions determined by acfuar'raf valuation:c of prior and future
service- liabi{ity witl~ respect to loca! miscellaneo~ s m~mbers and focal
safety members of said I~etirement System.
12. Public Agency shall also contribute to said R~tirement System as
follvws:
a. Contributions required per cover~d mem~ er on account of th~
'1959 Survivor genefits provic~ed under S ection 21574 of said
Retirement Law. (Subject to annual cha ~ge.) In addition, all
assets and liabilities of Public Agency anci its employees shafi be
pooled iri a single account, based r~n terr i insurance rates, for
survivors of afl iacal police members, loc a( fiire m~mf~ers and
local miscellaneous members.
b, A reasanab{~ amount, as fixed by the B~ard, payabie in one
insfia{lme~t within 60 clays of date of contr ~ct to cover the casts
of adminisfierir~g said System as it affec ts the employees af
Public /~gency, not including the costs of s ~ecial valuations or of
the periodic inv~stigation and valua#ians re~~uired by law.
c. A reasonable amount, as fixed by the B~ard, payable in one
installment as the occasions arise, ta covE:r fihe costs of special
valuations on account of employees of Puk ~lic Agency, and cosfis
of the periodic investigation and valuations required by law.
13. Contributions required vf Public Agency and it: ~ employees shall be
subject #o adjustm~nt by Board on account oi amendments to the
Public Employees' Retirement I~aw, and on acccunt of the experience
under the Retirement System as de#ermin~:d by the periodic
inves#igation and valuation required by said Refiire ment Law.
14. Con~ributions required of Pubfic Agency and i~s er ~pioyees shai{ be paid
by Pi.sbfic Agency to fhe Retirem~nt System withir i fift~~n day~ after the
~nd of the p~riod to whfch said contribu~ians refer or as may be
„ prescrib~d by Board regulation_ {f more or less th ~n the correct amount
of contributians is paid fiQr any period, proper adjG stment shall be made
in connection with subsequent remittances. Adju:~tmants on accaunt of
error~ in contributions required of any empby~e n iay be made by direct
paymen~s between ~h~ employee and the Board.
~ti~y
~~. This amendment sh~,~~~effectiv~ on the day of _ ,
\
~~OARD OF ADMINIS.T`~~ION CtTY COUN~~fI~
F"UBLtC EMPLOY~~'~~'R~TIREMENT SYSTEM CITY OF SA ~TA MDNiCA
`'.,;,~\,~~,:~ -
E~Y ~`-~~~ `. eY
C.ORI ~C~ARTLANQ, CHIEF PRESIDfNG OFFICER *,~;~
E;~~, ~R SERVICES bIVfSI~N ;~'~'`''
F',f:rB~.IC EMPI~OYEES' RETIREM~NT SYSTEM '~~~
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Witness Da~ ~`:~'
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Clerk
~Al/lENQMENT Eft# 54
PE:RS-CON~7Q2A (Rev_ 16\05)
e erence
eso u ~ o n o.
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