HomeMy WebLinkAbout14 - NB-3 - Amendment to Contract Between CalPers - 2/7/2012CITY COUNCIL AGENDA REPORT
MEETING DATE: FEBRUARY 7, 2012
ITEM NUMBER: NB -3
SUBJECT: AMENDMENT TO THE CONTRACT BETWEEN CALPERS AND THE CITY OF COSTA
MESA TO INCLUDE PROVISIONS PURSUANT TO GOVERNMENT CODE SECTION
20475 IN ORDER TO IMPLEMENT THE 2%@60 RETIREMENT FORMULA
(MISCELLANEOUS GROUP)
DATE: JANUARY 26, 2012
FROM: CEO's OFFICE/HUMAN RESOURCES DIVISION
PRESENTATION LANCE M. NAKAMOTO, HUMAN RESOURCES MANAGER
BY: BOBBY YOUNG, DIRECTOR OF FINANCE AND I.T.
FOR FURTHER INFORMATION CONTACT
RECOMMENDATION:
LANCE M. NAKAMOTO AT (714) 754-5172
RYAN THOMAS AT (714) 754-5104
1) Adopt a Resolution of Intention (Attachment 1) to approve an Amendment to the
Contract between the Board of Administration of the California Public Employees'
Retirement System (CaIPERS) and the City Council of the City of Costa Mesa
(Exhibit X) in order to implement the lower -level retirement formula of 2%@60 for
Miscellaneous employees.
2) Introduce, give first reading to be read by title only to, and waive further reading of
Ordinance No. 12- (Attachment II), which authorizes the amendment to the
CaIPERS contract to implement the 2%@60 retirement formula for Miscellaneous
employees.
3) Authorize the City Clerk to execute required CaIPERS certifications:
a. Certification of Governing Body's Action — PERS-CON-12 (Attachment III).
b. Certification of Compliance with Government Code Section 7507 PERS-
CON-12A (Attachment IV).
c. Certification of Compliance with Government Code Section 20475 for
Miscellaneous employees — PERS-CON-30 (Attachment V).
BACKGROUND:
Presently, the City of Costa Mesa contracts with CaIPERS for a 2.5% @ 55 retirement
plan for Miscellaneous employees. At a Special Meeting of the City Council Meeting on
October 26, 2010, the City Council adopted a Side Letter of Agreement (LOA) with the
Costa Mesa City Employees Association (CMCEA). The LOA amends the existing
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CMCEA Memorandum of Understanding (MOU) by adding "Section III, Article 6 —
Retirement — PERS Retirement Formula — New Hires: CMCEA agrees to the City
implementing a second tier PERS Retirement Formula of 2% @ 60 for new hires and
that the employees hired after the implementation of the 2%@ 60 formula will pay 7.0%
of their PERSable earnings towards the employee retirement contribution."
ANALYSIS:
In order to process contract amendments involving benefits with CaIPERS, the City
must first request preparation of a special valuation from CalPERS that discloses the
costs (or savings) of the specific benefit being requested. This is required in order to
disclose costs (or savings) to the public during the next step, the contract amendment
process. Once the valuation is received by the City, a request is made to CalPERS to
begin the contract amendment process. It takes approximately 30 days from the date of
request for CalPERS to prepare and deliver the required contract amendment
documents.
There is a specific period of time each year when Cal PERS allows agencies to amend
their contracts. In addition, California regulations will allow only one contract
amendment to be processed with CalPERS at a time.
During the past several months staff has been working with CalPERS representatives to
assemble the required paperwork and documentation necessary to implement the plan
that was agreed to of a 2%@60 retirement formula with one year final compensation
and post retirement survivor allowance.
CalPERS requires that clearly defined procedures established by State statute be
followed for contract amendments. The following are regulations required by CalPERS
in order to complete the contract amendment process:
1. A Resolution of Intention must be approved by the City Council, and a first
reading of the Ordinance authorizing an amendment to the contract must occur.
In addition, authorization for the City Clerk to provide "Certification of Governing
Body's Action", "Certification of Compliance with Government Code Section
7507" and "Certification of Compliance with Government Code Section 20475"
are required.
2. A final reading of the Ordinance and a City Council vote on adoption must occur at
least twenty (20) days after the adoption of the Resolution of Intention (March 6,
2012 City Council Meeting). The City Attorney recommends that an Urgency
Ordinance be acted on concurrently. If the Urgency Ordinance is adopted, it may
take effect as early as the day following adoption, March 7, 2012.
3. The effective date of the contract amendment must be the first day of a payroll
period and may not be earlier than the day after the effective date of the Ordinance
(or Urgency Ordinance). Therefore, the earliest possible effective date of the
contract amendment would be March 11, 2012, the first day of a payroll period.
E
ALTERNATIVES CONSIDERED:
The implementation of this second tier retirement plan is the City's obligation under the
LOA that was agreed to by both parties. In addition, this is the lowest CalPERS authorized
formula for miscellaneous employees that is available to the City. Any other alternatives
that the City Council would like to discuss with CMCEA would have to be done through the
meet and confer process.
FISCAL REVIEW:
The immediate total fiscal impact is unknown at this time due to fact that the 2@60 benefit
will only be given to new employees. However, the 2@60 benefit is less expensive and
therefore will cost less than the current 2.5% 55 benefit. According to a CalPERS
valuation prepared for this contract amendment, when the total number of active members
is the same in both plans the decrease in the employer rate would be 2.6%, a savings of
about $500,000 with the current payroll.
In the meantime, the City may have less active participants in the 2.5% 55 plan, which
may increase PERS rates for that plan, but the total retirement cost to the City should
remain constant before reducing over time.
Also, the lower benefit should also provide lower total liabilities and therefore help reduce
total unfunded liabilities the City currently has and would continue to have if new hires were
provided the 2.5% 55 benefit. Plans with this lower benefit would also be less volatile
during periods of economic recession and therefore more stable.
LEGAL REVIEW:
The City Attorney's Office has reviewed the attached documents and, where appropriate,
approved them as to form.
CONCLUSION:
In order to amend the CalPERS contract to establish a second tier 2% @ 60 retirement
formula for new hires within the Miscellaneous employees group, the following must
occur: adoption of the "Resolution of Intention to Approve an Amendment to the
Contract between the Board of Administration of the California Public Employees'
Retirement System and the City Council of the City of Costa Mesa"; introduction and
first reading of the Ordinance authorizing the amendment to the contract to implement
Government Code Section 20475 ; and authorization given to the City Clerk to execute
required CalPERS certifications.
3
LANCE M. NAKAMOTO
Human Resources Manager
BOBBY YOUNG
Director of Finance and I.T.
TAMARA S. LETOURNEAU
Interim Assistant CEO
TOM DUARTE
City Attorney
DISTRIBUTION: CEO
Assistant CEO
City Attorney
City Clerk
Assistant Finance Director
Budget and Research Manager
ATTACHMENTS: I Resolution of Intention and Exhibit Amendment to Contract
II Ordinance No.
III Certification of Governing Body's Action (PERS-CON-12)
IV Certification of Compliance with Government Code Section 7507
V Certification of Compliance with Government Code Section
20475
020712 Council Agenda Report-CalPERS Contract Amendment 02/07/2012 2pm
Different Level of Benefits — Miscellaneous Group
M
ATTACHMENT II
ORDINANCE NO. 12 -
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
COSTA MESA AUTHORIZING AN AMENDMENT TO THE
CONTRACT BETWEEN THE CITY OF COSTA MESA AND
BOARD OF ADMINISTRATION OF THE CALIFORNIA
PUBLIC EMPLOYEES' RETIREMENT SYSTEM.
WHEREAS, due to the ongoing economic difficulties, the City negotiated and
approved an agreement with its Miscellaneous employees in October 2010 whereby a
second tier PERS Retirement Formula of 2% @ 60 for new hires would be established and
that the employees hired after the implementation of the 2%@ 60 formula will pay 7.0% of
their PERSable earnings towards the employee retirement contribution with one year final
compensation and post retirement survivor allowance (section 21353 of the Retirement
Law); and
WHEREAS, to effectuate this second tier agreement under the State of California
Public Employee Retirement Law Section 20475, an amendment to the contract between
Costa Mesa and the California Public Employees' Retirement System must be approved.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF COSTA MESA DOES
HEREBY ORDAIN AS FOLLOWS:
Section 1. That an amendment to the contract between the City Council of the
City of Costa Mesa and the Board of Administration, California Public Employees'
Retirement System is hereby authorized, a copy of said amendment being attached hereto,
marked Exhibit "A," and by such reference made a part hereof as though herein set out in
full.
Section 2. The Mayor of the City of Costa Mesa is hereby authorized,
empowered, and directed to execute said amendment for and on behalf of said Agency.
Section 3. The Mayor shall sign and the City Clerk shall certify to the passage and
adoption of this Ordinance and shall cause the same to be published and posted pursuant
to the provisions of law.
Section 4. This Ordinance shall take effect and be in full force thirty (30) days from
and after the passage thereof, and prior to the expiration of fifteen (15) days from its
passage shall be published once in the DAILY PILOT, a newspaper of general circulation,
printed and published in the City of Costa Mesa or, in the alternative, the City Clerk may
cause to be published a summary of this Ordinance and a certified copy of the text of this
Ordinance shall be posted in the office of the City Clerk five (5) days prior to the date of
adoption of this Ordinance, and within fifteen (15) days after adoption, the City Clerk shall
cause to be published the aforementioned summary and shall post in the office of the City
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Clerk a certified copy of this Ordinance together with the names and member of the City
Council voting for and against the same.
PASSED AND ADOPTED this day of , 2012.
ATTEST:
Julie Folcik
City Clerk of the City of Costa Mesa
Gary Monahan
Mayor of the City of Costa Mesa
APPROVED AS TO FORM:
Thomas P. Duarte, City Attorney
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STATE OF CALIFORNIA )
COUNTY OF ORANGE )ss
CITY OF COSTA MESA )
I, Julie Folcik, City Clerk and ex -officio clerk of the City Council of the City of Costa
Mesa, hereby certify that the above and foregoing Ordinance No. 12- was introduced
and considered section by section at a regular meeting of said City Council held on the
day of February, 2012, and thereafter passed and adopted as a whole at a regular
meeting of said City Council held on the day of , 2012, by the following roll
call vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal of
the City of Costa Mesa this day of , 2012.
City Clerk and ex -officio Clerk of the
City Council of the City of Costa Mesa
14
Attachment III
CALIFORNIA LI EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Branch
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
(888) CalPERS (225-7377)
I hereby certify that the foregoing is a true and correct copy of a Resolution adopted by the
(governing body)
(public agency)
on
(date)
Clerk/Secretary
Title
PERS-CON-12 (rev. 1/96)
of the
Attachment IV
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Branch
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
(888) Ca1PERS (225-7377)
I hereby certify that in accordance with Section 7507 of the Government Code
the future annual costs as determined by the System Actuary for the
increase/change in retirement benefit(s) have been made public at a public meeting
of the
•If
(date)
Resolution / Ordinance.
of the
(governing body)
(public agency)
which is at least two weeks prior to the adoption of the
Adoption of the retirement benefit increase/change will not be placed on the consent
calendar.
Clerk/Secretary
Cate
PERS-CON-12A (rev. 1/96)
Attachment V
CALIFORNIA PUBLIC EMPLOYEES'RETIREMENT SYSTEM
Actuarial and Employer Services Branch
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
(888) CalPERS (225-7377)
I hereby certify that the
zmjij+r;► ,
+r TJ qW1 �1 I 4Z NAKAO
(governing body)
(public agency)
of the
has fully discharged all of the obligation imposed by Chapter 10 (commencing with
Section 3500) of Division 4 of Title 1, Government Code.
Title
Witness
i
PERS-CON-30 (Rev. 1/96)
Attachment I
Mq"QWQQ=
Lei I • • A k
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) is 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.
Presiding Officer
Title
Date adopted and approved
Amendment)
CON -302 (Rev. 4/96)
Ca1PERS
California
Public Employees' Retirement System
M 1
1 1NT TO CONTRACT
Between the
Board of • r
PublicCalifornia • • - - ,Retirementa the
City Council
City of
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 August
13, 1978, and witnessed August 7, 1978, and as amended effective July 15, 1979,
October 25, 1987, October 30, 1992, September 18, 1994, January 4, 1996, June 22,
1998, June 16, 2000, December 31, 2000, May 20, 2001, December 19, 2002,
September 28, 2008, August 20, 2009, June 6, 2010 and February 27, 2011 which
provides for participation of Public Agency in said System, Board and Public Agency
hereby agree as follows:
A. Paragraphs 1 through 16 are hereby stricken from said contract as executed
effective February 27, 2011, and hereby replaced by the following paragraphs
numbered 1 through 17 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 entering membership in
the miscellaneous classification on or prior to the effective date of this
amendment to contract, age 60 for local miscellaneous entering
membership for the first time in the miscellaneous classification after the
effective date of this amendment to contract and age 50 for local safety
members.
2. Public Agency shall participate in the Public Employees' Retirement
System from and after August 13, 1978 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 CaIPERS 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 program.
(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
CaIPERS 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 CaIPERS 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.
(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. Local Fire Fighters (herein referred to as local safety members);
b. Local Police Officers (herein referred to as local safety members);
C. 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:
6. Assets heretofore accumulated with respect to members in the local
retirement system have been transferred to the Public Employees'
Retirement System on September 18, 1994 and applied against the
liability for prior service incurred thereunder. That portion of the assets so
transferred which represent the accumulated contributions (plus interest
thereof) required of the employees under said local system has been
credited to the individual membership account of each such employee
under the Public Employees' Retirement System.
7. Benefits paid to pensioner or annuitants under the local system on or prior
to September 18, 1994 shall be continued and paid at their existing rates
by the Public Employees' Retirement System as authorized by Section
20481 of the Government Code.
8. The percentage of final compensation to be provided for local
miscellaneous members in employment before and not on or after
September 28, 2008 for each year of credited prior service is 0% and the
percentage of final compensation to be provided for each year of credited
current service is 100% and determined in accordance with Section 21354
of said Retirement Law (2% at age 55 Full).
9. The percentage of final compensation to be provided for local
miscellaneous members in employment on or after September 28, 2008
and not entering membership for the first time in the miscellaneous
classification after the effective date of this amendment to contract for
each year of credited prior service is 0% and the percentage of final
compensation to be provided for each year of credited current service is
100% and determined in accordance with Section 21354.4 of said
Retirement Law (2.5% at age 55 Full).
10. 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).
11. 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 21362.2 of said Retirement Law
(3% at age 50 Full).
12. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 20042 (One -Year Final Compensation).
b. Section 20965 (Credit for Unused Sick Leave).
C. Sections 21624 and 21626 (Post -Retirement Survivor Allowance).
d. Section 21573 (Third Level of 1959 Survivor Benefits) for local
miscellaneous members only.
e. Section 20903 (Two Years Additional Service Credit).
f. Section 20938 (Limit Prior Service to Members Employed on
Contract Date) for local safety members only.
g. Section 21536 (Local System Service Credit Included in Basic
Death Benefit) for local safety members only.
h. Section 21427 (Improved Nonindustrial Disability Allowance) for
local fire members only.
i. Section 21031 (Public Service Credit for Limited Prior Service) for
local miscellaneous members only.
Section 21024 (Military Service Credit as Public Service).
k. Section 21027 (Military Service Credit for Retired Persons).
Section 21023.5 (Public Service Credit for Peace Corps,
AmeriCorps VISTA, or AmeriCorps Service).
M. Section 20516 (Employees Sharing Cost of Additional Benefits):
Section 21354.4 (2.5% @ 55 Full formula) for local miscellaneous
members. From and after February 27, 2011 the miscellaneous
employees of Public Agency shall be assessed an additional
2.469% of their compensation for a total contribution rate of
10.469% pursuant to Government Code Section 20516.
Section 21362.2 (3% @ 50 Full formula) for local safety members.
From and after February 27, 2011 the safety employees of Public
Agency shall be assessed an additional 5% of their compensation
for a total contribution rate of 14% pursuant to Government Code
Section 20516.
n. Section 20475 (Different Level of Benefits). Section 21353 (2% @
60 Full formula) is applicable to local miscellaneous members
entering membership for the first time in the miscellaneous
classification after the effective date of this amendment to contract.
13. Public Agency, in accordance with Government Code Section 20834, shall
not be considered an "employer" for purposes of the Public Employees'
Retirement Law. Contributions of the Public Agency shall be fixed and
determined as provided in Government Code Section 20834, and such
contributions hereafter made shall be held by the Board as provided in
Government Code Section 20834.
14. 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 and local safety members of said
Retirement System.
15. 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 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.
16. 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.
17. 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 SYSTEM CITY OF COSTA MESA
BY
KAREN DE FRANK, CHIEF
CUSTOMER ACCOUNT SERVICES DIVISION
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
AMENDMENT CaIPERS ID #5937664258
PERS-CON-702A
BY
PRESIDING OFFICER
Witness Date
Attest:
Clerk