RPVCCA_CC_SR_2012_08_21_G_Second_Tier_Retirement_Benefit_Formula_Reso_Of_IntentionMEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
CAROLYNN PETRU,DEPUTY CITY MANAGER@)
AUGUST 21,2012
SECOND TIER 2%@ 60 RETIREMENT BENEFIT FORMULA
RESOLUTION OF INTENTION
CAROLYN LEHR,CITY MANAGER ~
RECOMMENDATION
Adopt Resolution No.2012-_;a Resolution of Intention to approve an amendment to
contract between the Board of Administration,California Public Employee's Retirement
System,and the City of Rancho Palos Verdes.
BACKGROUND
On September 20,2011,the City Council considered several recommendations made
by the City Council Pension Subcommittee,with concurrence from the Subcommittee's
consultant,to adopt revisions to the City's pension plan to attain sustainability and cost
control for current employees and new hires.For current employees,the retirement
benefit formula remained the same (2.5%@ 55,Le.the First Tier),but City Council
discontinued the employer-paid member contribution for both full-time and part-time
employees in conjunction with a one-time salary increase effective September 23,
2011.For future employees,the Council approved,and staff was directed to request a
contract amendment from CalPERS to establish,a Second Tier based on the 2%@ 60
retirement benefit formula with the determination of final compensation based on the
average earnings of the three highest years.Currently,the retirement benefit for First
Tier employees'final compensation is determined based on the highest single year.Of
the 58 authorized full-time positions,the City is currently staffed with 51 full-time
employees,and has not hired to fill any of the open positions,pending establishment of
the Second Tier.
DISCUSSION
Staff requested and received paperwork from CalPERS to modify the City's employee
retirement benefit plan to include a Second Tier for 2%@ 60 (see attached draft
resolution).Below is a list of the steps required to complete the contract amendment:
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Topic:2%@ 60 Second Tier Retirement Formula
Date:August 21,2012
Page 2
August21,2012
September 18,2012
September 19,2012
September 21,2012
City Council adoption of the Resolution of Intention
City Council adoption of the Urgency Ordinance authorizing
the contract amendment (Adoption of the ordinance must be
at least 20 days after Council adoption of the Resolution of
Intention)
Effective date of the Urgency Ordinance
Effective date of the Amendment to Contract (Because there
is a change to the employer and employee contribution
rates,the effective date of the contract amendment must be
the first day of a payroll period)
ADDITIONAL INFORMATION
In September 2011,based on the Pension Subcommittee recommendation,staff was
directed to inquire as to whether or not the City's existing Section 457 defined
contribution plan can be amended to enable the City to make matching contributions for
new employees enrolled in the Second Tier.Currently,existing employees can make
voluntary contributions to the plan on a pre-tax basis,but no matching contribution is
provided by the City.The total contribution to an individual account is controlled by
federal statute and is currently limited to $17K for 2012.Staff has confirmed with the
City's deferred compensation plan provider (ICMA)that the City can use its existing 457
plan for Second Tier employees with the City providing a contribution (the Pension
Subcommittee suggested up to 1%to 1.5%).No plan amendment or resolution would
be required to implement such a change to the program.ICMA indicated that it is a
matter of City policy as to whether there would be a vesting condition or if employees
would be required to provide a matching contribution.Another option available through
ICMA would be to set up a 401 (a)for Second Tier employees,which is the public sector
equivalent of a 401 (k).However,there are some significant differences between a 457
plan and a 401 (k)plan.Staff can provide additional information on the various options,
if so directed by Council in the future.
FISCAL IMPACT
Following the contract amendment,CalPERS has calculated the future annual costs,
based on the June 30,2010 actuarial,as follows:
First Tier
Employer Contribution Rate:13.941 %
Employee Contribution Rate:8.0%(2.5%@ 55)
Second Tier
Employer Contribution Rate:7.846%
Employee Contribution Rate:7.0%(2%@ 60)
V:\CAROLYNN\REPORTS\2012\20120821_CaIPERS Second Tier.doc
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Topic:2%@ 60 Second Tier Retirement Formula
Date:August 21,2012
Page 3
Attachments:
Resolution No.2012-_,
Draft Amendment to Contract
V:\CAROLYNN\REPORTS\2012\20120821_CaIPERS Second Tier.doc
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RESOLUTION OF INTENTION
TO APPROVE AN AMENDMENT TO CONTRACT
BETWEEN THE
BOARD OF ADMINISTRATION
CALIFORNIA PUBLIC EMPLOYEES'RETIREMENT SYSTEM
AND THE
CITY COUNCIL
CITY OF RANCHO PALOS VERDES
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 20475 (Different Level of Benefits).
Section 21353 (2%@ 60 Full formula)and Section 20037
(Three-Year Final Compensation)are applicable to local
miscellaneous members entering membership for the first
time in the miscellaneous classification after the effective
date of this amendment to contract.
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.
By:,_
Presiding Officer
Title
Date adopted and approved
(Amendment)
CON-302 (Rev.4/96)
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A.
CalPERS
EXHIBIT
California
Public Employees'Retirement System
----+----
AMENDMENT TO CONTRACT
Between the
Board of Administration
California Public Employees'Retirement System
and the
City Council
City of Rancho Palos Verdes
----+----
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
December 1,1974,and witnessed October 15,1974,and as amended effective April 1,
1978,September 16,1983,February 11,1993,September 2,2000,April 21,2001 and
September 29,2007 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 September 29,2007,and hereby replaced by the following paragraphs
numbered 1 through 14 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 local miscellaneous members entering membership in
the miscellaneous classification on or prior to the effective date of this
amendment to contract and age 60 for local miscellaneous members
entering membership for the first time in the miscellaneous classification
after the effective date of this amendment to contract.
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2.Public Agency shall participate in the Public Employees'Retirement
System from and after December 1,1974 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.Public Agency agrees to indemnify,defend and hold harmless the
California Public Employees'Retirement System (CaIPERS)and its
trustees,agents and employees,the CalPERS 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 attorneys 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 progrqm.
(b)Public Agency's election to amend this Contract to provide
retirement benefits,provisions or formulas that are different than
existing retirement benefits,provisions or formulas.
(c)Public Agency's agreement with a third party other than
CalPERS 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.
(d)Public Agency's election to file for bankruptcy under Chapter 9
(commencing with section 901)of Title 11 of the United States
Bankruptcy Code and/or Public Agency's election to reject this
Contract with the CalPERS Board of Administration pursuant to
section 365,of Title 11,of the United States Bankruptcy Code
or any similar provision of law.
(e)Public Agency's election to assign this Contract without the prior
written consent of the CaIPERS'Board of Administration.
(f)The termination of this Contract either voluntarily by request of
Public Agency or involuntarily pursuant to the Public Employees'
Retirement Law.
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(g)Changes sponsored by Public Agency in existing retirement
benefits,provisions or formulas made as a result of
amendments,additions or deletions to California statute or to
the California Constitution.
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.Employees other than local safety members (herein referred to as
local miscellaneous members).
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.ELECTED OFFICIALS;
b.CROSSING GUARDS;
c.WORK TRAINEES;
d.ADMINISTRATIVE INTERN;AND
e.SAFETY EMPLOYEES.
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 before and not on or after September 29,2007 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 as a local miscellaneous member,in
employment on or after September 29,2007 and not entering membership
for the first time in the miscellaneous classification after the effective date
of this amendment to contract 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 local miscellaneous member entering
membership for the first time in the miscellaneous classification after the
effective date of this amendment to contract shall be determined in
accordance with Section 21353 of said Retirement Law (2%at age 60
Full).
9.Public Agency elected and elects to be subject to the following optional
provisions:
a.Section 21574 (Fourth Level of 1959 Survivor Benefits).
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b.Section 20903 (Two Years Additional Service Credit).
c.Section 20042 (One-Year Final Compensation)for local
miscellaneous members entering membership on or prior to the
effective date of this amendment to contract.
d.Section 20475 (Different Level of Benefits).Section 21353 (2%@
60 Full formula)and Section 20037 (Three-Year Final
Compensation)are applicable to local miscellaneous members
entering membership for the first time in the miscellaneous
classification after the effective date of this amendment to contract.
10.Public Agency,in accordance with Government Code Section 20790,
ceased to be an "employer"for purposes of Section 20834 effective on
September 16,1983.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.
11 .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.
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.
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.
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B.
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 the employee and the Board.
This amendment shall be effective on the __day of _
BOARD OF ADMINISTRATION CITY COUNCIL
PUBLIG EMPLOYEES'RETIREMENT SYSTEM CITY OF RANCHO PALOS VERDES
BY BY _
KAREN DE FRANK,CHIEF PRESIDING OFFICER
CUSTOMER ACCOUNT SERVICES DIVISION
PUBLIC EMPLOYEES'RETIREMENT SYSTEM
Witness Date
Attest:
Clerk
AMENDMENT CalPERS ID #3846845523
PERS-CON-702A
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