HomeMy WebLinkAbout22 - Approval of Side Letter MOU - NBPE0 ��EWPOR, = CITY OF
NEWPORT
COU
NUIL STAFF REPORT
Agenda Item No. 22
November 26, 2013
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: City Manager's Office
Dave Kiff, City Manager
949- 644 -3002, dkiff(oo)newportbeachca.gov
Human Resources Department
Terri L. Cassidy, Deputy City Manager /Human Resources Director
949 - 644 -3303, tcassidv(@newportbeachca.00v
PREPARED BY: Terri L. Cassidy, Deputy City Manager /HR Director
Maggie Williams - Dalgart, Senior Human Resources Analyst
APPROVED:
TITLE: Approval of Side Letter Amending the 2012 -2014 Memorandum of
Understanding Between the City of Newport Beach and the
Newport Beach Police Association
ABSTRACT:
The City of Newport Beach and the Newport Beach Police Association (NBPA), which
represents both safety and non - safety employees, signed a Memorandum of
Understanding (MOU) that expires June 30, 2014. Included in the MOU is a provision
that safety employees share in the cost of the retirement benefit borne by the employer,
under a "cost share agreement', The Side Letter between the City and NBPA amends
the current MOU by incorporating certain new safety employees, not included in the
original contract (Tier III employees under the 2.7 % @57 formula), to participate in the
cost share agreement. In exchange, the NBPA requested a deferral to January 2014, of
the July 2013 scheduled salary adjustment and additional employee PERS retirement
contribution. City Council adoption of the Side Letter is the final action required to
complete the agreement.
RECOMMENDATION:
Approve the Side Letter (Attachment A) with the NBPA to: 1) delay the previously
agreed to salary adjustments and California Public Employees Retirement System
(PERS) employee retirement contributions, and 2) include new employees (hired under
the Tier III benefit formula) in the "cost -share agreement' to contribute the same total
amount toward retirement as employees in Tiers I and II.
Approval of Side Letter with the Newport Beach Police Association
November 26, 2013
Page 2
FUNDING REQUIREMENTS:
See financial information in the body of the discussion
DISCUSSION:
The Newport Beach Police Association represents approximately 180 employees in the
Police Department, including sworn (eg: Police Officer) and non-sworn (eg: Police
Dispatcher) members. The current MOU between the City and NBPA is for the period
January 1, 2012 "through June 30, 2014. Consistent with City Council direction, contract
terms negotiated in 2012 incorporate greater employee contributions toward the PERS
pension benefit, including a provision that employees share in the City's costs of the
retirement benefit ( "cost share "), as well as receive limited cost -of- living adjustments.
At the time the MOU was negotiated in 2012, the California Legislature had not yet
adopted comprehensive pension reform. The Public Employees Pension Reform Act
(PEPRA), effective January 1, 2013, was enacted to curtail growing pension obligations
and introduced a lower retirement benefit formula for employees new to the PERS
system (2.7 % @57 for Police and Fire), For Newport Beach, this meant a 'third tier
benefit since the City had -Wisely adopted lower tier formulae in advance of the
Legislature's action. Specifically, in November 2012, the City established Tier II
3 % @55 formula for Police and a 2 % @50 formula for Fire. Since the MOU between the
City and NBPA was adopted prior to PEPRA, Tier III had not been contemplated and
new employees hired under that tier were not included in the cost share agreement.
The attached Side Letter between the City and the NBPA amends the current MOU to
require Tier III employees share in the cost of the employer pension obligation, and
delays the salary/cost -of- living adjustments and the additional employee PERS
retirement contribution., from July 2013 to January 2014. Under the new agreement,
effective January 1, 2014, all safety employees will contribute a total of 12.1 % toward
the pension benefit and receive 4.4% salary adjustment. The 12.1 % retirement
contribution represents.a 5.85% increase in the employee pension obligation (the 5.85 %
is in addition to the 6.25 % employees were already contributing).
If the City Council approves the Side Letter with the NBPA, Human Resources and
Finance Department staffs will work to implement the terms to effective the first pay
period in. January 2014.
Fiscal Impact:
By the end of the -contract term (June 30, 2014), NBPA safety employees will be
contributing 12.1% toward the retirement benefit. This includes the 5.85% additional
employee PERS. pick -up in January 2014. Though employees will receive a 4.4 %
COLA/salary offset the same time as� the PERS pick -up, they will realize a net decrease
Approval of Side Letter with the Newport Beach Police Association
November 26, 2013
Page 3
in take home pay of 1.45 %. Due to the delay of the July 2013 adjustments, the
estimated loss, in savings to the City to implement the terms of the Side Letter 'is
$34,450 for the remainder of FY13 -14. This amount will be offset by current and future
savings associated with Tier III employees paying a greater share of pension costs.
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).
Submitted by
Terri L. C`assidyL
Deputy City Manager /HR Dire.-tor
Attachment A: Side Letter Amending the Memorandum of Understanding between the
City of Newport Beach and the Newport Beach Police Association
Attachment A
SIDE LETTER ANIENDING THE '2012 -2014 MEMORANDUM OF UNDERSTANDING
BETWEEN THE CITY OF NEWPORTBEACH AND THE NEWPORT BEACH POLICE
ASSOCIATION
WHEREAS, on June 26, 2012, the City of Newport Beach (the "City ") and the Newport Beach Police
Association (the "Association" and together with the Ciy; the "Parties") executed a memorandum of
understanding (the "MOU ") for the period of January 1, 2012 through June 30,2014; and
WHEREAS, included in the MOU is a provision for the Association's safety members to share in the
City's costs of providing California Public Employment Retirement System (CalPERS) benefits; and
WHEREAS, on November 25, 2012', the City adopted a Tier 11 benefit formula (3 % @55) for anyone
hired after November 25, 2012; and
WHEREAS, during the term of this agreement, to address the rising cost of public employer pension
obligations, the California _Legislature enacted the Public Employees Pension. Reform. .Act ( "PEPRA "),
which mandates a lower benefit factor for employees new to the retirement system (2.7 0lo @57) after
January , 1, 2013; and
WHEREAS, the MOU reflected the Parties intent that Tier 11 employees would be included in the, cost
share provisions agreed to in the MOU; and
WHEREAS, because the MDU preceded PEPRA, the MOU does not address the employees, subject to
PEPRA ("Tier 111 ") or the cost share provisions applicable to Tier ill employees; and
WHEREAS, the Association and the City engaged in a meet 'and confer process to discuss Tier IIl
members participating in the MOD's cost share provisions and the payment by the employees' of the
City's pension obligation; and
WHEREAS, the Association and City have reached agreement on an amendment to the 2012 -2014 MOU
to increase contributions by Flier 11I members and defer salary adjustments and additional Ca1PERS
contributions from July .1, 2013 to January 1, 2014 and now wish to memorialize this agreement in. this
Side Letter; and
WHEREAS, as part of this Side Letter, the;Parties have agreed thatthe remaining terms of the MOU shall .
remain in fulll force and effect except as set forth in this Side Letter.
NOW, THEREFORE, the City and the Association agree as follows:
Section 1: MOU Section 2.A.2' shall bemodified to read as follows:
2. Effective the payroll period including 1anLi iy 1, 2014 there shall be a base
salary increase of not less than 1.0 %, .nor more than 2.0 %. The precise amount
of the increase shall be determined with reference to the percent increase in the
Consumer Price Index (All Urban Consumers) 'for the Los Angeles, Riverside,
and Orange County 'areas for the 12 consecutive months ending on March 31,
2013. If there is either a decrease in the CPI, no increase in the CPI or the
increase is less than 1.0 %, the base salary increase shall. be 1..0%.. If the increase
is greater than 1.0 %, the base salary increase shall be in the same amount, but in
no event, greater than 2.0 %.
Section 2' MOU Section 2:A.4 shall be modified to read as follows-.
4. Concurrent with the January 1, 2014 implementation of the 3.1% Government Code §
20516(a) cost sharing, as to all unit safety members (see Section 4.D. below,) the base
salary for all unit safety members shall. be increased by 3.1 %.
Section 3: MOU Section 4,D.2.d shall be,modif ed to read as follows:
2. Current Sworn Members
d. Effective thepayroll period includingJanuarv, l, 2014, sworn unit members in
the 3 %@50 benefit formula shall pay an additional 2.75% of compensation as
and for the individual member's normal employee PERS contributions required
to be paid, by PERS (totaling 9.0% on Employee's Rate), Said payment shall. be
made pursuant to Government Code,§ 20691:,
S "ecfion.4: MOU Section. 4.D.5 shall be modified to read as follows:
All employees hired following City Council adoption of negotiated contract
amendnient(s) with CalPERS to implement a Tier I1, 3?lo@55 retire eni formula (Safety)
or 2'Yo@60 (Miscellaneous), or Tier111, 2.7%x@57 retirementforrnula (Safely) or 2°62
(Miscellaneous) under the Public Employees Pension Reform. Act (PEPRA) shall be
subject to the following retirementbengfits.
a, Tier 11: For employees ,first hired by the City between November 24 and
December 31,. 2012, or hired on or after January 1, 2013 and tare current
members of the retirement system, as dejined in Public Employees Pension
Reforni Act, the retirenent formula shall be 3% @ 55 for Safety and 2 %@60 for
.Miscellaneous, and calculated on the average 36 highestlnonths'salaiy.
Tier III.- For employees,firsi hired by the City on orufter Jamiary 1, 2013, and
Who do not meet the Tier if criteria, the retirement forrmrfa shall be 2.7% tt 57
for Safety and 2%u@62 for' Miscellaneous, and calculated on the average 36
highest nionths'salary.
b. All such hirees shall individually pay 100 % of the statutorily mandated member
normal employee PERS contribution as jo /lows: Safety Tier 11 employees shall
contribute 9% and Tier I11 shall contribute 11,:25% Miscellaneous (non- safety)
Tier 11 shalfsontribute 7% and Tier 111 shall contribute 6.25%
C. Unless specifically modified. herein, said newly hired employees shall be subject
to other then - existing City PERS contract provisions.
Section 5: MOU•Section 4.13.6 shall be modified to read as follows:
6. Safety Member Government Code §20516 Cost Sharing.
Provisio" "its under the Public Eniployees Pensioia. Reform Act of 2013 provide varying
employee contribution rates by bargaining unit, classification, or benefit factor, within a
cost share agreement. Effective the payroll period inchiding January 1, 2014, or as soon
thereafter as is reasonably, possible, the City shall take action to amend its contract with
PERS to provide for a Government' Code Section 20516(a), authorized cost sharing by
safely unit members in an amount that equals a total 12.1% employee contribution. 1'or
employees in Tiers I and H, the 20516(a) cost share contribution shall be 3..1% of
compensation earnable. The 3.1 %is in additian to the normal J %Meniber Contribution.
For employees in. Tier III the cost share contribution shall be .85% of compensation
eaniable, which is in addition to the 11.25% Member Contribution. This, cost sharing
contribution shall be treated as normal member PERS contributions to the extent
provided by statute.
The parties acknowledge that implementing a Government Code § 20516(a) PERS
contract amendment requires PERS approval. Therefore; the parties agree that if a
Section 20516(a) PERS contract amendment is not implemented ejfeciii,e Jantialy 1,
2014, the parties shall utilize Government Code � 20516(0 to effectuate the 3.1% or
.85% safety member cost sharing contribution. linplenientation of cost sharing pursuant
Section 20516(0 shall remain iii full force and effect unless or until 'a Section 20516(a)
contract amendment is approved by PERS: To the extent authorized by the IRS and /or
Franchise Tax Board, Section 20516(f) cost sharing shall be implemented through pre -tax
payroll deductions.
Finally, if for any reason unit safety member cost sharing is not authorized by.cither
Section 20516(a) or (f), then effective concurrent with either disallowance by PERS of
such cost sharing or a Superior Court judgment being rendered disallowing cost sharing
pursuant to Section 20516(a) or (f) the above Section 2.A(f) 3.1% base salary increase
shall be immediately terminated and the parties.sball reconvene the meet and confer
process confiner) to the issue of a. replacement for the 3.1 % or .85% cost sharing and
3.1% base salary increase. Moreover, upon the termination of the 3.1%o base salary
increase, the City shall simultaneously terminate any employee cost sharing pursuant to
subparagraph 8 of this Section, unless and until such 3.1% base salary increase is
reinstated by subsequent. mutual agreement of the parties
Attached to this Memorandum of Understanding as Exhibit B is a ivlarch. 1, 2012 letter
from PERS Senior Pension Actuary, Kerry Worgan. Based upon the representations
made in Exhibit :B; it is the agreement of the parties that unless and/or until modified
Pursuant to the meet and confer process or as mandated by law, these designated safety
member cost sharing contributions shall continue until the August 26, 2020 "expiration
date' designated in Exhibit, B and shall then concurrently revert to the amount of 2;142%
on August 26, 2020, unless and/or until said amount is modified pursuant to the meet and
confer process and/or requirements of law.
0
Section 6: MOU Secfion 4,13.8 shall be modified to read as follows:
8. Percent of retirement funding amount to be paid by safety members.
The CaIPERS safety retirement defined benebt plan is funded by CaIPERS mandated
employer contributions based on a percentage of payroll (and statutorily mandated
employee member contributions, as well.) The combined employer and member
,contribution percentages constitute the cost of 'funding the safety retirement plan.
Effective concurrent with implementation of the above .Iantnary .1, 2014 cost share
contribution, when added'to the safety normal member contribution of 9% (Tiers 1 & 11)
or 1. 1.25°/u (Tier 111) of cornpensatibr, sajey employees shall be finding 25.05% of the
cost of the safety retireneent plan; The sofety member.(iindineg of 25.05% of the cost of the
retireneent plan: shall remain in f dl force and effect on and after Januat7e 1; 2014, subject
to the mandate that maintenance of the 25;05 %'member f nding of the retirement cost
shall be limited to.an increase or decrease imGovernment Code § 20516 employee cost
sharingof'2.0%. For example, maitr tenaruceof25. 05 %employeeretirementjundingrate
shall result in a maximum Government Code § 20516 employee cost.sharing of 5.1% and
a 'minimum of 1.1 %a In the event that compliance with the above 25.05% member
finding of retirement cost wotdd result in a inember fimrding an excess of any statatory or
other legal limitations on such fiinding; each affected employee shall fund the mm-din um
amount. (not. to exceed 25.05% phis or minus 2 %) allowed by- stattae or other legal
authority. ,
Signatures on the following page
4.
APPROVED AS TO FORM:
CITY ATTO Y'S OFFICE
Date:
By
�c�--
Aaron C. Harp
City Attorney
ATTEST:
Date:
In
Leilani I. Brown
City Clerk
NEWPORT BEACH POLICE ASSOCIATION
Date:
5
CITY OF NEWPORT BEACH,
a California municipal corporation
Keith D. Curry
Mayor