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HomeMy WebLinkAbout09 - LIUNA Pension FundAugust 9, 1999 Agenda Item # 9 CITY OF NEWPORT BEACH Administrative Services Department Resource Management* Human Resources* Fiscal Services* M.I.S.•Revenue•Accounting August 9,1999 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL From: Dennis Danner, Administrative Services Director Z-04� SUBJECT: LIUNA PENSION FUND Recommendation Approve City Key and Management employees participation in the LIUNA Pension Plan. Authorize the Mayor to sign the attached Amendment to the MOU with the City Employees Association (CEA) and authorize the City Manager to sign the attached Standard Form of Participation Agreement and other documents required to implement the City's participation in the LIUNA Pension Fund for CEA employees and Key and Management personnel. Background The LIUNA Plan is a pension that will provide supplemental retirement benefits to CEA and Key and Management employees at no cost to the City. The attached report, which was submitted to the City Council on June 17, 1999, provides the details of the plan, and a synopsis of our "due diligence" efforts to examine the benefits and risks of the plan. The City has already agreed, in their 1998 MOU, to provide the LIUNA Plan for the CEA employees. However, upon review of the details of the plan and state law, the City Attorney has prepared the attached amendment to the MOU, approved by CEA, that clarifies the terms for the City's participation in the Plan. As explained in the June 17, 1999 report, the plan is also available to Key and Management employees, but only if the entire group participates. Nearly 75% of Key and Management employees have voted to participate in the plan. Key and Management employees who will benefit most from the prior service credit portion of the plan have volunteered to contribute to a separate fund for the next year. The fund will be established to offset the risk for those few employees who may forfeit their contributions because they leave the City before they are vested. If the Council provides the requested authorization, we will apply to LIUNA to make the commencement date retroactive to July 1, 1999. However, no money will be sent to LIUNA until the retroactive application is approved. CITY OF NEWPORT BEACH Administrative Services Department Resource Management-Human Resources-Fiscal Services •M.I.S.- Revenue,,Accounting June 17, 1999 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL From: Dennis Danner, Administrative Services Director SUBJECT: UPDATE ON LIUNA PENSION FUND Background and Executive Summary. Last year the City Council agreed by MOU to permit CEA represented employees to participate in a supplemental defined benefit retirement plan (in addition to PERS). That plan is available through the Laborers' International Union of North America ( LIUNA). Participation by employees is to be at no cost to the City. Since the plan calls for a direct contract between the City and LIUNA, we embarked on what turned out to be a lengthy and sometimes difficult "due diligence" examination of the program. Implementation has therefore been delayed (with CEA's concurrence), but we are now nearly ready to proceed in accordance with the MOU. 0 The purpose of this report is to bring the City Council up to date on what has transpired during the past fourteen months, as well as a re- acquaintance with the provisions of the LIUNA plan. In light of the amount of time that has gone by, staff seeks renewed authority to proceed with final implementation. For reference, it should be noted that other employee associations have approached the City with tentative proposals for supplemental retirement plans of their own. This happens to be the first to get completely through the meet and confer process, but others will probably follow. Key provisions of the plan. • LIUNA has been in existence since 1967, and they report having 26,000 members. They specify that their National (Industrial) Pension Fund, which is the subject here, is: a) a joint labor- management trust maintained in accordance with the Taft - Hartley Act; b) an employee pension benefit plan and multiemployer plan within the meaning of the Employee Retirement Income Security Act (ERISA) June 17, 1999 Page 2 (although ERISA does not apply to the City, it does apply to this plan); . and c) a qualified pension plan and related tax - exempt trust under the Internal Revenue Code. • This is a defined benefit pension plan, as compared to a defined contribution plan. That means it is more like PERS, with a set pension schedule, than the City's deferred compensation plan (administered by Great West Life), which has no set pension schedule. The brochure contains the benefit table. The table is expressed in terms of a specific contribution amount per hour. However, instead of a flat rate, the group can specify a percentage of pay (must be the same percentage for everyone). That is what CEA has elected to do. • Although the contributions are technically defined as employer paid, the CEA agreement specifies that they are going to be made in lieu of part of a pay raise. All investment and policy decisions are in the hands of a Board of Trustees, half of which are appointed by the Union, and half of which are appointed collectively by the employers participating in the plan. • Vesting is normally five years. However, for employees already in the first group when the plan is initiated at the City, the vesting is one year, provided the employee has worked for the City for five years. For that same group, once employees are vested, all prior service with the City will be counted for pension credit. There are a few potential exceptions to this, the most significant of which involves the City departing the plan before the employee retires. No up front payment is required to "buy back" this prior service credit. • Once vested, the employee is entitled to benefits at retirement age, even if he /she has left City employment in the meantime. There are no provisions for cash withdrawal instead of retirement benefit, since contributions are made by the City. Non - represented employees also included The plan is also available to non - represented employees, as a group, one time only, when CEA employees begin participation. The only caveat is that 100% of the members of the non- represented group must participate. In this regard, participation by management groups is apparently fairly common. We asked about this. The stated reason LIUNA has developed the practice of making the plan available to non - represented (usually management) groups, as they are doing here, is because many of the private sector employers they deal with have only one labor organization associated with the company, and/or this is the only retirement plan available. Therefore if the management employees were not afforded the opportunity to participate, there would be no other plan June 17, 1999 Page 3 available to them. (They also readily admit that in those cases, it tends to have a softening impact on any barriers to organizing the labor force.) In the City's case, some information has been distributed to key and management employees about the plan, but for most it has been over a year. We will be holding information meetings and, in the end, asking for a vote as to whether the group desires to participate. This does NOT mean that key and management employees would be joining or forming an organized labor unit. The City's "due diligence" efforts. Obtaining and analyzing complete information regarding the LIUNA Plan has not been a simple process. During the past fourteen months or so, several things have transpired. ❑ By far, the most significant developments regarding this plan were PERS actions. In response to our inquiry, PERS determined that the plan was not permitted under current California law. Shortly thereafter (not in response to any request by us), the PERS Board decided to sponsor legislation that would authorize such plans, as long as they were clearly in a supplementary role to PERS retirement. This legislation has been introduced, and there is no known or anticipated opposition. ❑ The CEA has decided that they would like to participate at the 1% level, and they have at least informally agreed that the City would have the right to approve an increase or decrease in that level of participation. If the key and management employees participate as well, it must be at the same level. ❑ We asked an attorney who specializes in this area of the law to analyze the plan. The fact that nothing concrete could be determined is part of what led to our initial communication with PERS. Additional information from that attorney regarding specifics of the plan itself may be needed; depending on what we learn from the benefits consultant (below). ❑ We have retained a benefits consultant to determine the potential additional risk the City takes on with this plan. He is also analyzing the viability of the plan, specifically with regard to its actuarial health, some of its contract provisions, and its financial desirability for future employees coming to the City. (Because of the prior service provisions, there is little question that the plan is financially desirable for existing employees with some tenure.) ❑ As part of this process, we are contacting other agencies that are participating in the plan. We have also had several pieces of correspondence and phone calls with LIUNA officials trying to clarify specific aspects of the plan. The most recent of these was a conference call two weeks ago attended by our benefits consultant (John Bartel with AON) Robin from the City Attorney's office, and Gail, Lauren, Dan, Dick, and myself from Administrative Services. The CEA labor representative also sat in on our end, and, once again, several LIUNA officials were on the other end of the call. A number of issues were put to rest, but, as is so often the case, additional questions were generated. These June 17, 1999 Page 4 are generally in the area of actuarial information and specific contract wording. Answers • to those generated yet more questions. Officials at LIUNA, especially their actuary, made it clear that they have "never" been queried to this level of detail by prospective participants. ❑ The City Attorney's office has examined the contract in conjunction with the wording of the MOU and the actual plan document itself. Efforts are underway to reconcile questions and issues which arose from this effort. Action. No formal action is requested at this time. Assuming the actuarial report contains no unexpected adverse information, and the specifics of the contract can be agreed upon, a contract with LIUNA will be before the City Council for approval in the near future. If you have any questions before then about the plan, please contact Dick Kurth or meat Extensions 3124 or 3123 respectively. 0 FROM PHONE NO. : 3104449846 JLL. 26 1999 07:49AM P2 AMENDMENT TO MEMORANDUM OF UNDERSTANDING This Amendment to the July 1, 1998 - June 30, 2001 Memorandum of Understanding between the City of Newport Beach (City) and the Newport Beach City Employee's Association (NBCEA) is dated this 2(L of Tom, 199°1, for purposes of identification and is bad on the following: RECITALS A. 'Paragraph 8 of the MOU provides as follows" 8. Pension Fund *NBCEA shall have the right to designate once during the term of this Agreement, a portion of salary for represented employees to the LIUNA Pension Fund. This contribution is made at the election of NBCEA and shall be deducted from salary. Contributions shall be made on an hourly basis, not to exceed 40 hours per week. The CWs sole obligation shall be to forward designated amounts to the Fund. NBCEA and LIUNA shall indemnify and hold hamrless the City against any and all claims made as a result of its action pursuant to this section. Monies diverted to the pension fund shah be considered as salary for all compensation comparison purposes.' B. LIUNA. means the Laborers International Union of North America. The UUNA Pension Fund is a defined benefit pension plan that is tax qualified under Section 401(a) at seq. of the Internal Revenue Code, (hereinafter referred to as the'Pian'). C. City contreats with the Public Employees Redrement System ('PERS') as its primary pension plan provider. Subsequent to entering Into the MOU, City learned from PERS, that participation in the Plan would violate provisions of California Government Code Section 20303 and 20894. D. N13CEA was informed of the conflict and agreed not to participate in the Plan until further investigation of the Pion was accomplished and cordlrcts with PERS were resolved. a:.— '.1118 PHONE NO. : -3104449846 JUL. 26 1999 07:49HM P3 • E. In March 1999, PERS introduced legislation to permit supplemental defined benefit plan such as the LIUNIA Plan. The legislation has been introduced as Senate Bill 583, but has not yet been signed into law. F. NBCEA and City wish to begin participation in the Plan effective "41. 1999, subject to certain conditions: and terms in addition to the provrssons contained in the MOU. NOW, THEREFORE, NBCEA and City mjree as follows: NBCEA agrees that City shall deduct one percent (1%) from each represented employee's salary as of�u {y 1, 1999 to contribute to the Plan. 2. NBCEA agrees that the Plan shall be supplemental to the PERS Pension Plan. Deduction from salary shall not increase above one percent (1 %) of salary nor shall the deduction be decreased without agreement of one hundred percent (100 %) of NBCEA membership and City. 3. NBCEA agrees that the salary deduction shall be made in the form of one percent (1 %) for each hour each represented employee is paid, including hours of paid vacation, paid holidays and other periods for which pay is received by the employee in accordance with the MOU. 4. NBCEA agrees to continue participation in the Plan and that participation shah be part of all future MOUs unless after meet and confer it is agreed that withdrawal from the Plan will not result in any withdrawal liability or other additional cost to City under the Plan's rules and regulatons. NBCEA acknowledges that a change in its association representation could cause the NBCEA to lose the right to participate in the Plan. NBCEA agrees that it shall not make any change in the association or its representative that would cause the NBCEA to lose the right to participate in On Plan without prior agreement of City. 5. If Senate Bill 583 or any other State Legislation should farll to be. signed Into law and PERS determines that participation in the Plan eontlidis with State law, City may terminate ft contract with the Plan without w ithdratllral liability. S. The terns and conditions of the MOU and this Amendment shaA be binding on any wacessor association. FROM = PHONE NO. : 3104449846 JUL.. 26 1999 07:50RM P4 u,a_ w n�a• �� �� Acwdinpty, this Amendment shall not be effective until the MOU is full executed by authorized representatives of the Parties. Dennis O'Neil. Mayor Haddam. City Clerk H. Burnham, City Attorney President,N CEA Paul Bechley, NBCEA ftreftntative G1Pk 6 Lo cal III F.AS & % al WWOOMOUWb **ELu'sro11%&Twd.071M.doe DATE: DATE: DATE: 7 DATE: % I DATE: 1l r n7 0 3 TOTAL P.04 • "STANDARD FORM OF PARTICIPATION AGREEMENT" The undersigned Employer and Union represent that the only agreement between the said parties regarding pensions or retirement for employees covered by the Collective Bargaining Agreement between the parties is as follows: 1. Commencing with the day of , 19 , and for the duration of the current Collective Bargaining Agreement between the said parties, and any renewals or extensions thereof, the Employer agrees to make payments to the Laborers' International Union of North America National (Industrial) Pension Fund for each employee covered by said Collective Bargaining Agreement, as follows: (only one section (a), (b) or (c) is Ito be completed) (a) For each day or portion thereof for which an employee receives pay, the Employer shall make a contribution of $ per hour to the above -named Pension Fund, but not less than $ per day (8 x the hourly rate) $ per week (5 x the daily rate) for each employee. For the purposes of this Agreement, each day paid for, including days of paid vacation, paid holidays and other days for which pay is received by the employee, in accordance with the Collective Bargaining Agreement, shall be counted as days for which tributions are payable. b) For each hour or portion thereof for which an employee receives pay, the Employer shall make a contribution of $ to the above -named Pension Fund for which the employee is paid. For purposes of this Agreement each hour paid for, including hours of paid vacation, paid holidays and other periods for which pay is received by the employee, in accordance with the Collective Bargaining Agreement, shall be counted as hours for which contributions are payable. (c) For each hour or portion therof for which an employee receives pay, the Employer shall make a contribution of % for which a gross salary is paid to the Employee to the above -named Pension Fund. For purposes of this Agreement each hour paid for, including hours of paid vacation, paid holidays and other periods for which pay is received by the employee, in accordance with the Collective Bargaining Agreement, shall be counted as hours for which contributions are payable. 2. Contributions shall be paid on behalf of an employee starting with the employee's first day of employment in a job classification covered by the Collective Bargaining Agreement. 3. The payments to the Pension Fund required above shall be made to the "LIUNA National (Industrial) Pension Fund" which was established under an Agreement and Declaration of Trust, a copy of which has been signed by the Employer in the place provided at the end of such agreement. 4. It is agreed that all contributions shall be made at such time and in such manner as the Trustees require; and the Trustees shall have the authority to have an independent Certified Public Accountant audit the payroll and wage records of the Employer for the purposes of determining the accuracy of contributions to the Pension Fund. S. If the Employer becomes delinquent in making its required contributions to the Fund within the meaning of the Agreement and Declaration of Trust, the Union shall have the right to take whatever steps it deems necessary to lure compliance with this Agreement, any provision of the Collective Bargaining Agreement notwithstanding; fever, such action by the Union shall neither bind nor otherwise affect the Pension Fund's rights and recourse with respect to the Employer's delinquency. The Employer's liability for payment hereunder shall not be subject to any grievance or arbitration procedure provided under the Collective Bargaining Agreement. An Employer which becomes delinquent in making contributions to the Pension Fund' shall be subject to the procedures and remedies provided in the Agreement and Declaration of Trust, including interest, liquidated damages, auditing charges, attorneys' fees and court costs. LABORERS' INTERNATIONAL UNION OF BOA RD UNION Tr1USTNTRUSTUSTEES EEB NORTH AMERICA ARTHUR A. COIA, COCHAIRMAN NATIONAL (INDUSTRIAL) PENSION FUND JAMES J. NORWOOD °�,,._ -��11 905 • 16th Street, N.W. MASON M. WARREN •v�^ • Washington, D.C. -20006 -1765 EMPLOYER TRUSTEES GEORGE F. HAMMERSMITH. SR., FUND ADMINISTRATOR .®, COCHAIRMAN HENRY J. MORESCHI ALFRED A. CAVALLARO PHONE: (202) 737 -1664 GEORGE J. FISCHER FAX: (202) 347 -0721 "STANDARD FORM OF PARTICIPATION AGREEMENT" The undersigned Employer and Union represent that the only agreement between the said parties regarding pensions or retirement for employees covered by the Collective Bargaining Agreement between the parties is as follows: 1. Commencing with the day of , 19 , and for the duration of the current Collective Bargaining Agreement between the said parties, and any renewals or extensions thereof, the Employer agrees to make payments to the Laborers' International Union of North America National (Industrial) Pension Fund for each employee covered by said Collective Bargaining Agreement, as follows: (only one section (a), (b) or (c) is Ito be completed) (a) For each day or portion thereof for which an employee receives pay, the Employer shall make a contribution of $ per hour to the above -named Pension Fund, but not less than $ per day (8 x the hourly rate) $ per week (5 x the daily rate) for each employee. For the purposes of this Agreement, each day paid for, including days of paid vacation, paid holidays and other days for which pay is received by the employee, in accordance with the Collective Bargaining Agreement, shall be counted as days for which tributions are payable. b) For each hour or portion thereof for which an employee receives pay, the Employer shall make a contribution of $ to the above -named Pension Fund for which the employee is paid. For purposes of this Agreement each hour paid for, including hours of paid vacation, paid holidays and other periods for which pay is received by the employee, in accordance with the Collective Bargaining Agreement, shall be counted as hours for which contributions are payable. (c) For each hour or portion therof for which an employee receives pay, the Employer shall make a contribution of % for which a gross salary is paid to the Employee to the above -named Pension Fund. For purposes of this Agreement each hour paid for, including hours of paid vacation, paid holidays and other periods for which pay is received by the employee, in accordance with the Collective Bargaining Agreement, shall be counted as hours for which contributions are payable. 2. Contributions shall be paid on behalf of an employee starting with the employee's first day of employment in a job classification covered by the Collective Bargaining Agreement. 3. The payments to the Pension Fund required above shall be made to the "LIUNA National (Industrial) Pension Fund" which was established under an Agreement and Declaration of Trust, a copy of which has been signed by the Employer in the place provided at the end of such agreement. 4. It is agreed that all contributions shall be made at such time and in such manner as the Trustees require; and the Trustees shall have the authority to have an independent Certified Public Accountant audit the payroll and wage records of the Employer for the purposes of determining the accuracy of contributions to the Pension Fund. S. If the Employer becomes delinquent in making its required contributions to the Fund within the meaning of the Agreement and Declaration of Trust, the Union shall have the right to take whatever steps it deems necessary to lure compliance with this Agreement, any provision of the Collective Bargaining Agreement notwithstanding; fever, such action by the Union shall neither bind nor otherwise affect the Pension Fund's rights and recourse with respect to the Employer's delinquency. The Employer's liability for payment hereunder shall not be subject to any grievance or arbitration procedure provided under the Collective Bargaining Agreement. An Employer which becomes delinquent in making contributions to the Pension Fund' shall be subject to the procedures and remedies provided in the Agreement and Declaration of Trust, including interest, liquidated damages, auditing charges, attorneys' fees and court costs. - 2 - 6. The Employer and the Union agree to accept, be bound by and comply fully with all teams of the Agreement. and Declaration of Trust of the Laborers' International Union of North America National (Industrial) Pension Fund and any amendments thereto, whether heretofore or hereafter made. 7. It is agreed that the Pension Plan adopted by the Trustees of the said Pension Fund shall at all times conform with the requirements of the Internal Revenue Code so as to enable the Employer at all times to treat contributions to the Pension Fund as a deduction for income tax purposes. 8. The parties agree that this Participation Agreement shall be considered a part of the Collective Bargaining Agreement between the undersigned parties. 9. The expiration date of the present Collective Bargaining Agreement between the undersigned parties is , 19 Any copies of renewal or extension agreements will be furnished promptly to the Pension Fund Office and, if not consistent with the Participation Agreement, can be used by the Trustees as the basis for termination of participation of the Employer. FOR THE LABORERS' INTERNATIONAL UNION OF NORTH AMERICA, LOCAL UNION No. DISTRICT COUNCIL By: Date: — Authorized Officer FOR THE EMPLOYER: (Insert Name of Employer) Address By: Date: _ Authorized Officer For plants located' at: 0 0