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HomeMy WebLinkAboutAgenda Packet - April 2, 1996 - CC • 4151112113 0 OF AZUSA Finance Department • 213 E. Foothill Blvd. • P.O. Box 1395 • Azusa,CA 91702-1395 (818)334-5125 AGENDA ITEM TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: GEOFF CRAIG, DIRECTOR OF FINANCE I ' VIA: HENRY GARCIA, CITY ADMINISTRATOR DATE: APRIL 2, 1996 SUBJECT: AMENDMENT TO CONTRACT WITH PUBLIC EMPLOYEES' RETIREMENT SYSTEM TO INCLUDE EMPLOYER-PAID MEMBER SHARE IN BASE PAY DURING FINAL COMPENSATION PERIOD Background As part of the negotiations which culminated in the five-year contracts with the various bargaining units, management agreed that, effective July 1, 1996, the City shall amend its contract with the Public Employees Retirement System(PERS)to include the Employer Paid Member Share in base pay during the final compensation period. This report explains the procedure and the cost and presents two Resolutions and an ordinance for Council to consider. Findings The City of Azusa joined the California Public Employees' Retirement System in 1949. The System is the State of California's retirement plan for its employees and it allows local agencies to contract with it for similar services. In this way, cities such as Azusa are spared the trouble and expense of administering separate, smaller, retirement systems, respectively. Contributions to the System consist of a fixed "employee" share of 7% of compensation and a variable "employer" share of between 5%and 6%(plus any additional that is still needed to pay for the"unfunded liability" for the cost of retirements of employees who were already eligible for benefits when the City joined the System in 1949 and for changes over the ensuing years in the overall age, longevity and contractual 50s�96 Honorable Mayor and Members of the City Council April 2, 1996 Page 2 benefits of the City work force). As a rule, cities in California pay both shares of the Retirement System contributions for their full-time employees by depositing the required funds with the System. Several years ago,the PERS Board of Administration made the finding that, if the employer agrees, the 7% "employee" share can be included in the measurement of compensation upon which the annuitant's future retirement pay will be based. This is known as "Employer-Paid Member Contributions Converted to Payrate During the Final Compensation Period" for local miscellaneous members. (At Azusa, for miscellaneous members, the"Final Compensation Period" is defined as the 36 highest-paid consecutive months of PERS-covered full-time employment.) As part of the negotiations which culminated in the five-year contracts with the various bargaining units, management agreed that, effective July 1, 1996, the City shall amend its PERS contract with the Public Employees Retirement System (PERS)to include this provision. The employee share will be shown as both an addition to, and a deduction from, gross pay. Federal and State Income Taxes will be deferred until the employee receives his or her retirement income. The City has nearly paid its "unfunded liability". In addition, PERS investment specialists have again garnered a double-digit rate of return on their investment of the System's idle cash. For these reasons, PERS estimates that the cost to the City of Azusa for this amendment will be as low as 1.196% of payroll for the next twenty years (a total of$852,700) and that it will drop to 0.536% thereafter. However, it appears that the PERS investment specialists will again achieve a very large return on their investments and that this could have the effect of altogether erasing the City's "unfunded liability". Thus Azusa's increase would only be 0.536%, or, perhaps, less. In return, City employees agreed to forego a cost-of-living increase scheduled in 1995 and they developed a lower-cost disability insurance plan that together saved the City over $250,000 annually, beginning with this Fiscal Year. Council would begin the amendment process by passing the attached Resolution of Intention and the attached Resolution pertaining to deferral of income taxes on the contributions. Then Council would introduce the attached Ordinance authorizing the amendment. Staff is recommending that Council proceed. I ' Honorable Mayor and Members of the City Council April 2, 1996 Page 3 Recommendations Staff recommends that Council: 1 Pass the attached Resolution of Intention to Approve an Amendment to the contract Between the Board of Administration of the Public Employees' Retirement System and the City Council of the City of Azusa; and 2. Pass the attached Resolution of Intention to Defer Income Taxes from the Employer-Paid Member Share of the City's contributions to the Public Employees' Retirement System; and 3. Introduce an Ordinance Authorizing an Amendment to the Contract between the City of Azusa and the Board of Administration of the California Public Employees' Retirement System; and 4. Authorize the Mayor to sign the"Certification of Compliance with Government Code Section 7507". persepmc.001 ORDINANCE NO. 96-01 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF AZUSA AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM THE CITY COUNCIL OF THE CITY OF AZUSA does ordain as follows: SECTION 1. An amendment to the Contract between the City Council of the City of Azusa and the Board of Administration of the 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 Azusa is hereby authorized, empowered, and directed to execute said amendment for and on behalf of the said agency. SECTION 3. This Ordinance shall take effect thirty (30)days after the date of its adoption, and prior to the expiration of fifteen (15) days from passage thereof shall be published as required by law and thenceforth and thereafter the same shall be in full force and effect. PASSED AND APPROVED this 4th day of March 1996. iS_AV\t , 6—Lret,)' MAYOR STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES )ss. CITY OF AZUSA ) I,ADOLPH SOLIS, City Clerk of the City of Azusa, do hereby certify that the foregoing Ordinance No. 96-01 was regularly introduced and placed upon its first reading at a meeting of the City Council on the 5th day of February, 1996. That thereafter, said Ordinance was duly adopted and passed at a regular meeting of the City Council on the 4th day of March, 1996 by the following vote, to wit AYES COUNCILMEMBERS: HARDISON, MADRID, NARANJO, BEEBE, ALEXANDER NOES COUNCILMEMBERS: NONE ABSENT CO i CIL,/MBERS: N• E \i f ordinance\milsvc.ord EXHIBIT 'A' AMENDMENT TO CONTRACT BETWEEN THE BOARD OF ADMINISTRATION OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND THE CITY COUNCIL OF THE CITY OF AZUSA The Board of Administration, Public Employees' Retirement System, hereinafter referred to as Board, and the governing body of above public agency, hereinafter referred to as Public Agency, having entered into a contract effective January 1, 1949, and witnessed December 20, 1948, and as amended effective July 1, 1956, September 1, 1958, March 2, 1959, May 1, 1960, September 3, 1967, December 22, 1968, July 15, 1973, April 20, 1975, January 18, 1981, July 1, 1984, January 12, 1986, February 7, 1988, November 27, 1988, April 5, 1994 and June 30, 1995, which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows: A. Paragraphs 1 through 14 are hereby stricken from said contract as executed effective June 30, 1995, 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, age 55 for local fire members and age 50 for local police members. 2. Public Agency shall participate in the Public Employees' Retirement System from and after January 1, 1949 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. 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: NO ADDITIONAL EXCLUSIONS LL/1JL I 5. Prior to January 1, 1975, those members who were hired by Public Agency on a temporary and/or seasonal basis not to exceed 6 months were excluded from PERS membership by contract. Government Code Section 20336 supersedes this contract provision by providing that any such temporary and/or seasonal employees are excluded from PERS membership subsequent to January 1, 1975. Legislation repealed and replaced said Section with Government Code Section 20305 effective July 1, 1994. 6. The percentage of final compensation to be provided for local miscellaneous members for each year of credited prior and current service shall be determined in accordance with Section 21354 of said Retirement Law, subject to the reduction provided therein for service on and after January 1, 1956, the effective date of Social Security coverage, and prior to March 31, 1975, termination of Social Security, for members whose service has been included in Federal Social Security (2% at 55 Full and Modified). 7. The percentage of fmal compensation to be provided for each year of credited prior and current service as a local fire member shall be determined in accordance with Section 21366 of said Retirement Law (One-half pay at age 55 Full). 8. The percentage of fmal compensation to be provided for each year of credited prior and current service as a local police member shall be determined in accordance with Section 21362 of said Retirement Law (2% at age 50 Full). 9. Public Agency elected and elects to be subject to the following optional provisions: a. Sections 21624, 21626 and 21628 (Post-Retirement Survivor Allowance). b. Section 21573 (Third Level of 1959 Survivor Benefits). c. Section 20042 (One-Year Final Compensation) for local police members only. d. Section 20903 (Two Years Additional Service Credit). e. Section 20965 (Credit for Unused Sick Leave) for local miscellaneous members and local police members Only. f. Section 20930.3 (Military Service Credit as Public Service), Statutes of 1976 for local miscellaneous members only. 10. Public Agency, in accordance with Government Code Section 20790, ceased to be an "employer" for purposes of Section 20834 effective on November 27, 1988. 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 and local safety members of said Retirement System. 12. Public Agency shall also contribute to said Retirement System as follows: a. Public Agency shall contribute$2.00 per employee, per month on account of the liability for 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. 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. 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. B. This amendment shall be effective on the day of , 19 BOARD OF ADMINISTRATION CITY CtICIL PUBLIC EMPLOYEES' RETIREMENT SYSTEM OF THE (c� 114 CITY OF P SA 9�� p BY QO BY CHIEF ACTUA1 X Presiding Offic`er`` ACTUARIAL OFFICE c . PUBLIC EMPLOYRETIREMENT SYSTEM •`' ES' rte, • Witness Date �r • OA> � Attest: AMENDMENT Clerk PERS-CON-702A (Rev. 1/96)