The URL can be used to link to this page

Home My WebLink About05 - PERS ContractCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 5 January 22, 2008 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Human Resources Department Barbara Ramsey, Human Resources Director 949 - 644 -3303, bramsey @city.newport- beach.ca.us SUBJECT: Resolution to Provide Section 20516 (Employee Sharing Cost of Additional Benefits) applicable to Section 21354.4 (2.5% @ 55 formula) for local miscellaneous members. RECOMMENDATION: Adopt Resolution 2008 -_ relating to the City's Intention to Approve an Amendment to the Contract between the Board of Administration, California Public Employees' Retirement System (PERS) and the Newport Beach City Council to authorize cost sharing for the "2.5 % @55" . retirement formula for local miscellaneous members, including Key and Management. 2. Introduce Ordinance 2008 -_ relating to a PERS contract amendment. DISCUSSION: The California Public Employees Retirement System (PERS or www.calpers.ca.gov) manages the largest retirement program for Newport Beach city employees, as well as City employees' health benefit plans (Newport Beach City employees generally do not receive Social Security, because the City does not participate in. Social Security). The PERS portfolio is one of the largest in the nation, and provides retirement and health benefits to approximately 1.5 million public employees, retirees, and their families and to more than 2,500 employers: Newport Beach contracts with PERS to administer city employees' benefits, including a defined benefit (DB) retirement plan. This agenda item is related to the cost sharing agreement between the City of Newport Beach miscellaneous employees and the City Council relating to the new. 2.5% @ 55 retirement formula that was implemented December 22, 2007. Although PERS is aware of this cost sharing agreement, they require that we approve a separate contract amendment. The City reached agreement with the three Miscellaneous units as a result of negotiations on July 19, 2007. Among other things, the agreement provided that the City would amend its contract with PERS to implement a "2.5% @ 55" retirement benefit with the City's miscellaneous employees effective January 1, 2008, if the employees would pay for the benefit by forgoing certain salary increases. PERS contract amendment for employee cost sharing January 22, 2008 Page 2 The City Council directed that the employees pay for the benefit by requiring that the `employee rate" portion of the PERS rate (which the City now pays on behalf of the employees, a relatively common practice in municipalities) be changed to clearly show that the net increase in cost (PERS puts this cost at about 3.42% of eligible payroll) resulting from the 2.5% @ 55 plan be put on the employee rate side of the PERS payment. As a part of negotiations, the Miscellaneous units agreed to forgo 3.42% in salary increases and instead have 3.42% of an overall 3 -year, 11 % salary package applied directly to PERS to cover the full cost of the 2.5% @ 55 plan. In effect, this employee -paid benefit will serve as a Defined Contribution ( "DC ") component of the PERS "DB" plan, because the employees can take their accrued 3.42% of payroll payment with them should they leave the PERS system. On October 23, 2007 the City Council adopted Ordinance 2007 -62 approving the 2.5% @ 55 retirement formula for miscellaneous employees. This new contract amendment completes the negotiated benefit by amending our contract with PERS to allow the employees to pay for the additional benefit and be added to the employee rate. The attached Resolution of Intention is required by PERS for the employee cost sharing. The resolution's purpose is to notify the public that the City Council intends to amend the City's contract with PERS for cost sharing and what the cost will be. The PERS contract amendment cannot become effective until the adoption of an ordinance. The ordinance will: be heard today for 18t reading. Second reading may not occur until at least twenty (20) days have passed since the Council adopted the proposed Resolution of Intention. Therefore, 2nd reading of, the ordinance approving the PERS contract amendment is expected to be on the City Council's agenda for February 12, 2008. The ordinance takes effect 30 days after 2"d reading. Funding. Availability: The enhanced retirement for miscellaneous employees is fully funded by the employees and there is no additional cost to the City. Prepared & Submitted by: 6�� (;)a 4= Barbara Ramsey Human Resources Director Attachments: Resolution NO.2008- Ordinance NO. 2008 - Draft Contract Amendment RESOLUTION NO. 2008- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH DECLARING ITS INTENTION TO APPROVE AN AMENDMENT TO CONTRACT BETWEEN THE BOARD OF ADMINISTRATION, CALIFORNIA, PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND THE CITY COUNCIL, CITY OF NEWPORT BEACH WHEREAS, the Public Employees' Retirement Law permits the participation of public agencies and their employees in the Public Employees' Retirement System by the execution of a contract, and sets forth the procedure by which said public agencies may elect to subject themselves and their employees to amendments to said Law; and WHEREAS, one of the steps in the procedures to amend this contract is the adoption by the governing body of the public agency of a resolution giving notice of its intention to approve an amendment to said contract, which resolution shall contain a summary of the change proposed in said contract; and WHEREAS, the following is a statement of the proposed change: To provide Section 20516 (Employees Sharing Cost of Additional Benefits) applicable to: Section 21354.4 (2.5 %,@ 55 Full formula) for local miscellaneous members, effective December 22, 2007. 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, 20207. Thereafter, in any given contribution year, the maximum employee cast sharing contribution cannot exceed .838% of payroll. NOW, THEREFORE, BE IT RESOLVED that the governing body of the above agency does hereby give notice of intention to approve an amendment to the contract between said public agency and the Board of Administration of the Public Employees' Retirement System, a copy of said amendment being attached hereto, as an "Exhibit' and by this reference made a part hereof. Passed and adopted by the City Council of the City of Newport Beach at a regular meeting held on the 22i0 day of January 2008. ATTEST: LaVonne Harkless, City Clerk -1- Ed Selich, Mayor ORDINANCE NO. 2008- AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM NOW THEREFORE, the City Council of the City of Newport Beach, California, HEREBY ORDAINS as follows: SECTION 1: That the Amendment to the contract between 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 set out in full. SECTION 2: The Mayor of the City of Newport Beach is hereby authorized, empowered and direction to execute said Amendment for and.on behalf of the City. SECTION 3: 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, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses and phrases be declared unconstitutional. SECTION 4: This ordinance shall take effect thirty (30) days after its adoption, and prior to expiration of fifteen (15) days from the passage thereof shall be published once in the Daily Pilot, a newspaper of general circulation, published in Costa Mesa and circulated in the City of Newport Beach, and thenceforth and thereafter shall be in full force and effect. SECTION 5: This ordinance was introduced at a regular meeting of the City Council of the City of Newport Beach, hell on the _ day of 2008, and adopted on the _ day of 2008, by the following vote, to wit: AYES, COUNCILMEMBERS NOES,COUNCILMEMBERS ABSENT COUNCILMEMBERS MAYOR ATTEST: CITY CLERK California Public Employees' Retirement System EXHIBIT A MMENT 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 and December 22, 2007 which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows: A. Paragraphs 1 through 14 are hereby stricken from said contract as executed effective December 22, 2007, and hereby replaced by the following paragraphs numbered 1 through 14 inclusive: 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 local miscellaneous members, age 55 for ocean beach lifeguards and age 50 for local fire members and local police members. ` PLEASE pn ,��, t T KIN! f 2. 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. 3. 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. Ocean Beach Lifeguards (included as local.safety members); d. Employees other than local safety members (herein referred to as local miscellaneous members). 4. 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. 5. The percentage of final compensation to be provided for each year of credited prior and current service as a 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). 6. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member in employment on or after December 22, 2007 shall be determined in accordance with Section 21354.4 of said Retirement Law (2.5% at age 55 Full). 7. The percentage of final compensation to be provided for each year of .credited prior and current service as a local fire member and local police member shall be determined in accordance with Section 21362.2 of said Retirement Law (3% at age 50 Full). 8. The percentage of final compensation to be provided for each year of credited prior and current service as ocean beach lifeguards shall be determined in accordance with Section 21363.1 of said Retirement Law (3% at age 55 Full). 9. 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 Govemment 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). g. Section 21548 (Pre - Retirement Option 2W Death Benefit). h. Section 20516 (Employees Sharing Cost of Additional Benefits): Section 21354.4 (2.5% @ 55 Full formula) for 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. iL.LI'1 LLUNJiuisrr c %ttlr 10. 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 Govemment Code Section 20834. 11. Public Agency shall contribute to said Retirement System the contributions determined by actuarial valuations of prior and future service liabdity.with respect to local miscellaneous members and local safety members of said Retirement System. 12. 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. 13. 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. 14. 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 thmployee and the Board. acv B. This amendment shall b ctive on the day of BOARD OF ADMINISTRA CITY COUNCIL PUBLIC EMPLOYEES' REMENT SYSTEM CITY OF NEWPORT BEACH BY BY LORI MCGART D, CHIEF PRESIDING OFFICE EMPLOYER,S€I ICES DIVISION �` PUBLIC EMPWYEES' RETIREMENT SYSTEM ,t Witness., e Attest': AMENDMENT ER# 0060 PERS - CON -702A (Rev. 1 0105)