HomeMy WebLinkAbout36 - Authorizing an Amendment to the City's Contract with CaIPERS to Eliminate Section 20516(a) Cost Sharing for Citywide Miscellaneous Tier I EmployeesQ �EwPpRT
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TO:
FROM:
CITY OF
NEWPORT BEACH
City Council Staff Report
PREPARED BY:
August 26, 2025
Agenda Item No. 36
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
Grace K. Leung, City Manager - 949-644-3001,
gleung@newportbeachca.gov
Jason AI -Imam, Finance Director/Treasurer — 949-644-3126,
jalimam@newportbeachca.gov
TITLE: Ordinance No. 2025-21: Authorizing an Amendment to the City's
Contract with CaIPERS to Eliminate Section 20516(a) Cost Sharing
for Citywide Miscellaneous Tier I Employees
ABSTRACT:
Since 2007, Tier I miscellaneous employees have contributed an additional 2.420% of
the employer's share of pension costs to the California Public Employees' Retirement
System (CaIPERS) under a cost -sharing provision pursuant to Government Code Section
20516(a), in addition to their statutory 8% member contribution.
Following recent labor negotiations, the City of Newport Beach has reached, or is in the
process of finalizing, agreements with most employee groups to reduce or eliminate this
cost -sharing contribution. Employees will, however, remain responsible for their statutory
8% member contribution.
CaIPERS has advised that eliminating cost sharing under Section 20516(a) requires a
contract amendment. On July 8, 2025, the City Council approved Resolution No.
2025-43 to initiate this amendment process. Subsequently, on July 22, 2025, the Council
approved Resolution No. 2025-48, adopting a resolution of intention to proceed with the
proposed contract amendment. As the next step, a proposed ordinance is being
presented to the City Council to formally implement these changes.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
and
b) Waive full reading, direct the City Clerk to read by title only, and introduce Ordinance
No. 2025-21, An Ordinance of the City Council of the City of Newport Beach,
California, Authorizing an Amendment to the Contract Between the City Council of the
City of Newport Beach and the Board of Administration of the California Public
Employees' Retirement System; and pass to a second reading on September 9, 2025.
36-1
CalPERS Contract Amendment for Misc. Employees to Reduce Employee Contributions
August 26, 2025
Page 2
DISCUSSION:
Since 2007, the City's CalPERS contract has included a cost -sharing arrangement for
Tier I miscellaneous employees (City employees not in the CalPERS safety retirement
plan hired on or before November 23, 2012) under which employee groups agreed to
contribute a portion of the employer's share toward their pensions pursuant to
Government Code Section 20516(a). This contribution is in addition to the statutory
8% member contribution required for Tier I miscellaneous employees. Currently, the
CalPERS contract requires employees to contribute 2.420% of the employer's share
under this cost -sharing arrangement.
In addition, employees have been required to contribute further amounts based on the
terms of their respective labor agreements, pursuant to Government Code Section
20516(f).
The City has entered into good faith labor negotiations with City labor groups that
represent miscellaneous City employees, as well as discussions with its unrepresented
employees. As a result of those negotiations, the City has entered into tentative
agreements with the majority of these groups and employees to reduce or eliminate the
amount of employee cost sharing set forth in those agreements, and anticipates reaching
agreements with the remaining groups shortly.
For employees who will continue cost -sharing, those contributions will be governed solely
through collective bargaining agreements pursuant to Government Code
Section 20516(f). The City has been informed by CaIPERS that eliminating cost sharing
under section 20516(a) requires a contract amendment with CalPERS.
The City understands that processing such an amendment typically takes several months.
This matter is urgent, as many of the new labor agreements are already in effect.
On July 8, 2025, the City Council approved Resolution No. 2025-43, initiating the process
to amend the CalPERS contract to reduce the Section 20516(a) cost -sharing contribution
from 2.420% to 0%. On July 22, 2025, the Council approved Resolution No. 2025-48,
adopting a resolution of intention to proceed with the amendment.
The next step is the introduction of an ordinance to formally implement the changes
FISCAL IMPACT:
California Government Code Section 7507 requires disclosure of the future costs
associated with any changes to retirement benefits. The proposed amendment to the
City's contract with CalPERS would eliminate the current cost -sharing arrangement under
which affected employees contribute 2.42% toward the employer's share of retirement
costs. Once the contract amendment takes effect, the City would resume paying this
2.42% portion. As such, the amendment does not result in any increase to the overall
cost of retirement benefits —only a shift in who is responsible for paying this portion, from
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CalPERS Contract Amendment for Misc. Employees to Reduce Employee Contributions
August 26, 2025
Page 3
employees back to the City. Employees will, however, remain responsible for their
statutory 8% member contribution.
From a budgetary perspective, there is no fiscal impact associated with this item, as the
cost of the reduced employee cost -sharing contributions has already been incorporated
into the amended budget following the adoption of the related agreements for the affected
bargaining groups.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A - Ordinance No. 2025-21
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ATTACHMENT A
ORDINANCE NO. 2025- 21
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH, CALIFORNIA, AUTHORIZING AN
AMENDMENT TO THE CONTRACT BETWEEN THE CITY
COUNCIL OF THE CITY OF NEWPORT BEACH AND THE
BOARD OF ADMINISTRATION OF THE CALIFORNIA
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
WHEREAS, Section 200 of the City Charter, of the City of Newport Beach, vests
the City Council with the authority to make and enforce all laws, rules and regulations
with respect to municipal affairs subject only to the restrictions and limitations contained
in the City Charter and the State Constitution, and the power to exercise, or act
pursuant to any and all rights, powers, and privileges or procedures granted or
prescribed by any law of the State of California; and
WHEREAS, the City Council of the City of Newport Beach desires to amend the
contract between the City Council of the City of Newport Beach and the Board of
Administration, California Public Employees' Retirement System, as set forth herein.
NOW THEREFORE, the City Council of the City of Newport Beach ordains as
follows:
Section 1: An amendment to the contract between the City Council of the City
of Newport Beach and the Board of Administration, California Public Employees'
Retirement System, is hereby authorized, a copy of said amendment being attached
hereto, marked Exhibit, and by such reference made a part hereof as though herein set
out in full.
Section 2: The Mayor of the of the City of Newport Beach is hereby
authorized, empowered, and directed to execute said amendment for and on behalf of
the City of Newport Beach.
Section 3: The recitals provided in this ordinance are true and correct and are
incorporated into the substantive portion of this ordinance.
Section 4: If any section, subsection, sentence, clause or phrase of this
ordinance is for any reason held to be invalid or unconstitutional, such decision shall not
affect the validity or constitutionality of the remaining portions of this ordinance. The
City Council hereby declares that it would have passed this ordinance and each section,
subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid or
unconstitutional.
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Ordinance No. 2025-
Page 2 of 3
Section 5: The City Council finds the introduction and adoption of this
ordinance is not subject to the California Environmental Quality Act ("CEQA") pursuant
to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable
indirect physical change in the environment) and 15060(c)(3) (the activity is not a
project as defined in Section 15378) of the CEQA Guidelines, California Code of
Regulations, Title 14, Division 6, Chapter 3, because it has no potential for resulting in
physical change to the environment, directly or indirectly.
Section 6: The Mayor shall sign and the City Clerk shall attest to the passage
of this ordinance. This ordinance shall be effective thirty (30) calendar days after its
adoption. In compliance with Charter Section 414, prior to the expiration of thirty (30)
calendar days from the passage of this ordinance, the ordinance shall be published at
least once in the Daily Pilot, a newspaper of general circulation, published and
circulated in the City of Newport Beach, County of Orange, and thenceforth and
thereafter the same shall be in full force and effect.
36-5
Ordinance No. 2025-
Page 3 of 3
This ordinance was introduced at a regular meeting of the City Council of the City
of Newport Beach held on the 26th day of August, 2025, and adopted on the 9th day of
September, 2025, by the following vote, to -wit:
AYES:
NAYS:
ABSENT:
Joe Stapleton, Mayor
ATTEST:
Molly Perry, Interim City Clerk
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
Aaron C. Harp, City Attorney
Attachment: Exhibit - Amendment to the Contract Between the City Council of the City
of Newport Beach and the Board of Administration, California Public
Employees' Retirement System
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CaIPERS
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 Newport Beach
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 July 1, 1945, and witnessed
April 27, 1945, and as amended effective March 1, 1948, November 1, 1951, April 1, 1956,
October 31, 1970, September 18, 1971, December 11, 1971, September 24, 1977,
December 18, 1977, June 17, 1978, March 24, 1979, June 30, 1979, January 12, 1989,
December 2, 1989, June 12, 1996, July 12, 2000, August 26, 2000, June 15, 2002,
November 30, 2002, November 13, 2004, July 23, 2005, December 22, 2007, March 15,
2008, June 20, 2009, and November 23, 2012, which provides for participation of Public
Agency in said System, Board and Public Agency hereby agree as follows:
A. Paragraphs 1 through 17 are hereby stricken from said contract as executed effective
November 23, 2012, and hereby replaced by the following paragraphs numbered 1
through 19 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 classic
local miscellaneous members entering membership in the miscellaneous
classification on or prior to November 23, 2012, age 60 for classic local
miscellaneous members entering membership for the first time in the
miscellaneous classification after November 23, 2012, age 62 for new
miscellaneous members, age 50 for classic local fire members, classic local
ocean beach lifeguards and those classic local police members entering
membership in the police classification on or prior to November 23, 2012, age
55 for classic local police members entering membership for the first time in the
police classification after November 23, 2012, and age 57 for new local safety
members.
36-7
. Public Agency shall participate in the Public Employees' Retirement System
from and after July 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.
. 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 attorney 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) Any dispute, disagreement, claim, or proceeding (including without
limitation arbitration, administrative hearing, or litigation) between
Public Agency and its employees (or their representatives) which
relates to Public Agency's election to amend this Contract to provide
retirement benefits, provisions or formulas that are different than such
employees' 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.
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. Local Ocean Beach Lifeguards (included as local safety members);
d. Employees other than local safety members (herein referred to as local
miscellaneous members).
36-8
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:
a. POLICE CADETS; AND
b. RESERVE OFFICERS.
6. The percentage of final compensation to be provided for each year of credited
prior and current service as a classic local miscellaneous member in
employment before and not on or after December 22, 2007, shall be determined
in accordance with Section 21354 of said Retirement Law (2% at age 55 Full).
7. The percentage of final compensation to be provided for each year of credited
prior and current service for classic local miscellaneous members in
employment on or after December 22, 2007, and not entering membership for
the first time in the miscellaneous classification after November 23, 2012, shall
be determined in accordance with Section 21354.4 of said Retirement Law
(2.5% at age 55 Full).
8. The percentage of final compensation to be provided for each year of credited
current service as a classic local miscellaneous member entering membership
for the first time in the miscellaneous classification after November 23, 2012,
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 new local miscellaneous member shall be
determined in accordance with Section 7522.20 of said Retirement Law (2% at
age 62 Full).
10. The percentage of final compensation to be provided for each year of credited
prior and current service as a classic local safety member entering membership
in the safety classification on or prior to November 23, 2012, shall be
determined in accordance with Section 21362.2 of said Retirement Law (3% at
age 50 Full).
11. The percentage of final compensation to be provided for each year of credited
current service as a classic local fire member entering membership for the first
time in the fire classification and classic local ocean beach lifeguards entering
membership for the first time in the ocean beach lifeguard classification after
November 23, 2012, shall be determined in accordance with Section 21362 of
said Retirement Law (2% at age 50 Full).
12. The percentage of final compensation to be provided for each year of credited
current service as a classic local police member entering membership for the
first time in the police classification after November 23, 2012, shall be
determined in accordance with Section 21363.1 of said Retirement Law (3% at
age 55 Full).
36-9
13. The percentage of final compensation to be provided for each year of credited
prior and current service as a new local safety member shall be determined in
accordance with Section 7522.25(d) of said Retirement Law (2.7% at age 57
Full).
14. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 20421 ("Local Safety Member" shall include ocean beach
lifeguards of a city as described in Government Code Section 20421).
b. Section 21574 (Fourth Level of 1959 Survivor Benefits).
C. Section 21024 (Military Service Credit as Public Service).
d. Section 21389 (Second Opportunity to Elect 1959 Survivor Benefits).
Legislation repealed said Section effective September 27, 1979.
e. Section 20965 (Credit for Unused Sick Leave) for local miscellaneous
members only.
f. Section 20042 (One -Year Final Compensation) for classic local
miscellaneous members and classic local safety members entering
membership on or prior to November 23, 2012.
g. Section 21548 (Pre -Retirement Option 2W Death Benefit).
h. Section 20516 (Employees Sharing Cost of Additional Benefits) for
miscellaneous members entering membership on or prior to November
23, 2012. From and after November 23, 2012, and until the effective date
of this amendment to contract:
Section 21354.4 (2.5% @ 55 Full formula) for first tier classic local
miscellaneous members.
The employee cost sharing contributions are not to exceed 2.420%. The
maximum employee cost sharing contribution is the normal cost plus the
increase in the accrued liability due to the benefit improvement amortized
over 20 years. In no event shall the employee cost sharing contribution
attributable to the unfunded liability remain in effect beyond December
31, 2027. Thereafter, in any given contribution year, the maximum
employee cost sharing contribution cannot exceed .838% of payroll.
Section 20475 (Different Level of Benefits). Section 21362 (2% @ 50
Full formula) and Section 20037 (Three -Year Final Compensation) are
applicable to classic local fire members entering membership for the first
time with this agency in the fire classification and classic local ocean
beach lifeguards entering membership for the first time with this agency
in the ocean beach lifeguard classification after November 23, 2012,
36-10
Section 21363.1 (3% Q 55 Full formula) and Section 20037 (Three -Year
Final Compensation) are applicable to classic local police members
entering membership for the first time with this agency in the police
classification after November 23, 2012, and
Section 21353 (2% @ 60 Full formula) and Section 20037 (Three -Year
Final Compensation) without Section 20516 (Employees Sharing Cost of
Additional Benefits) are applicable to classic local miscellaneous
members entering membership for the first time with this agency in the
miscellaneous classification after November 23, 2012.
15. Public Agency, in accordance with Government Code Section 20790, ceased to
be an "employer" for purposes of Section 20834 effective on September 24,
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.
16. 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.
17. 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 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 miscellaneous members
and local safety members.
b. 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.
C. 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.
18. 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.
36-11
19. 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 NEWPORT BEACH
BY
MELODY BENAVIDES, CHI
PENSION CONTRACTS PREFUNDING
PROGRAMS DIVISIONtt��',,4
PUBLIC EMPLOYEERETIREMENT SYSTEM
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36-12