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Home My WebLink About04 - Safety Employees Enhanced RetirementJuly 25, 2000 Agenda Item 4 . CITY OF NEWPORT BEACH HUMAN RESOURCES DEPARTMENT TO: Mayor and City Council FROM: Sharon Wood, Assistant City Manager SUBJECT: Implementation of Enhanced Retirement for Safety Employees RECOMMENDATION Adopt the following resolution: 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 The City's memoranda of understanding (MOUs) with the safety associations provide that, if additional retirement plan options become available through PERS, negotiations would be reopened and "...any agreed upon changes shall be on a cost neutral basis to the City." Two enhanced retirement benefit options (3% at 50 and 3% at 55) for safety employees in California became available this year. To assist employers in providing this benefit, the CAPERS Board adopted a resolution providing a one -time increase in the actuarial value of assets from 90% to 95% of market value for the calculation of the July 1, 2000 to June 30, 2001 employer rate. Even with this increase in actuarial value, there will be costs for Newport Beach to provide either of the two new options. The City's negotiating team has been meeting with the safety associations over the past several months to develop a plan that meets the cost neutral criteria. At the staff level, we reached agreement on a plan for the 3% at 55 option, after the associations determined that the 3% at 50 option would be too costly. PERS projected the 3% at 55 option to have a rate increase of 3.9 %. This results from an increase in present value of employee benefits of $13,420,449, and an increase in unfunded accrued liability of $3,286,773.. Staff was concerned that this does not reflect the true, long -term cost of the option, and requested additional actuarial study by AON, our benefits consultant. AON's study concluded that there would be an additional cost of $1,061,303. The associations have agreed to make up the full cost primarily through foregoing a portion of the "lookback" salary adjustment for this year and the entire "lookback" adjustment next year. In addition, they have agreed to make additional payments to the City's retiree medical program, as the miscellaneous employees did in exchange for the 2% at 55 retirement program. I anticipate that Supplemental MOUs memorializing this plan will be on the City Council agenda for August 8, 2000. The attached Resolution of Intention is the first step in implementing the enhanced retirement plan. Its purpose is to notify the public that the City Council intends to amend the PERS contract and what the cost of the amendment will be. The Council does not approve the amendment until adoption of an ordinance, which may not occur until twenty days after the Resolution of Intention. If the Supplemental MOUs are approved on August 8, the ordinance approving the PERS contract amendment will be on the City Council agenda for August 22. RESOLUTION NO. 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 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 21363.1 (3% @ 55 Full formula) for local safety members. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Newport Beach does hereby give notice of its 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 25`n day of July 2000. John E. Noyes, Mayor ATTEST: LaVonne M. Harkless, City Clerk AR*4"", Ca1PERS California Public Employees' Retirement System EXHIBIT 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 and July 12, 2000 which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows: A. Paragraphs 1 through 12 are hereby stricken from said contract as executed effective July 12, 2000, and hereby replaced by the following paragraphs numbered 1 through 12 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 and age 55 for local safety members. LEASE DO NOT S"'N "EXHIBIT ONLY" 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. 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 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 safety member shall be determined in accordance with Section 21363.1 of said Retirement Law (3% at age 55). The required member contribution rate is 9% of reportable compensation. 7. 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 21573 (Third Level of 1959 Survivor Benefits) for local miscellaneous members. ?LEASE DO NOT SI7N "EXHIBIT ONLY' C. Section 21574 (Fourth Level of 1959 Survivor Benefits) for local safety members. d. Section 21024 (Military Service Credit as Public Service), Statutes of 1976. e. Section 21389 (Second Opportunity to Elect 1959 Survivor Benefits) for local miscellaneous. Legislation repealed said Section effective September 27, 1979. f. Section 20965 (Credit for Unused Sick Leave) for local miscellaneous members. g. Section 20042 (One -Year Final Compensation). 8. 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. 9. 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 of said Retirement System. 10. 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 21573 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. b. 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 safety members. C. 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. d. 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. 11. 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. 12. 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 RSTEM CITY OF NEWPORT BEACH _,eex1; - BY KENNETH W. ACTUARIAL & PUBLIC EMPL BY N�PTMiEF PRESIDING OFFICER �tR SERVICES RETIREMENT SYSTEM DIVISION ��(Js C� 3 \' wit ate stt:` Clerk AMENDMENT PERS- CON•702A (Rev. 6496)