HomeMy WebLinkAboutL- 1 Amendment to Contract wtih Public Employees' Retirement System ofA�G
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Finance Department * 213 E. Foothill Blvd. *P.O. Box 1395 * Azusa, CA 91702-1395
Tel : (818) 812-5203 *FAX(818)334-6358
AGENDA ITEM
TO: HONORABLE MAYOR AND MEMBE' t 1 THE CITY COUNCIL
FROM: GEOFF CRAIG, DIRECTOR OF FINAN JL4
VIA: HENRY GARCIA, CITY ADMINISTRATOR`,A�
V
DATE: MAY 12, 1997
SUBJECT: AMENDMENT TO CONTRACT WITH PUBLIC EMPLOYEES'
RETIREMENT SYSTEM TO INCLUDE EMPLOYER-PAID MEMBER
SHARE IN BASE PAY DURING FINAL COMPENSATION PERIOD
AND TO RECOGNIZE MILITARY SERVICE CREDIT AS PUBLIC
SERVICE FOR LOCAL POLICE MEMBERS
Background
As part of the negotiations which culminated in the four-year contract with the Azusa Police
Officer's Association, management agreed that, in keeping with its other employee units, the City
shall amend its contract with the Public Employees' Retirement System (PERS) to include the
Employer Paid Member Share in base pay for police members during the final compensation
period and to recognize Military Service Credit as Public Service. This report explains the
procedure and the cost and presents a Resolution 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 9% of compensation and a variable "employer" share
42 ` /19/97
C}, m
Honorable Mayor and Members of the City Council
May 12, 1997
Page 2
of approximately 13.759% (plus or minus any additional that from time to time is needed to pay
for the "unfunded liability" for the cost of changes over the ensuing years in the overall age,
longevity and contractual 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.
Employer-Paid Member Contribution
Several years ago, the PERS Board of Administration made the finding that, if the employer
agrees, the 9% "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
Contribution Converted to Payrate During the Final Compensation Period", which, for the local
police members, is the final 12 months of PERS-covered full-time employment. As part of the
negotiations which culminated in the four-year contract with the APOA, management agreed that,
effective June 29, 1997 the City shall amend its contract with the Public Employees' Retirement
System (PERS) to include this provision. To implement it, 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.
If the City completes the necessary actions and the contract amendment effective date is prior to
July 1, 1997, the estimated cost applicable to the benefit will be a 3.558% increase to the
employer contribution rate for local police members. This equates to roughly $125,000 per year.
Military Service endment
A PERS member may elect to purchase up to four years of service credit for any continuous active
military or merchant marine service prior to employment. The member must contribute an amount
equal to the contribution for current and prior service that the employee and the employer would
have made with respect to that period of service. The member's payment will be calculated by
PERS based upon the employer's contribution rate at the time of the member's election, and the
member's compensation and contribution rate at the first period of service with the employer after
the military service. Interest on both employer and employee contributions will be calculated from
the date of membership with the current employer to date of the member's election, and included
in the member cost. The member may pay for the service in lump sum or by monthly payments
not to exceed 96 months. This benefit applies only to active members while in employment with
an employer providing this benefit is in its contract.
Honorable Mayor and Members of the City Council
May 12, 1997
Page 3
Employer Cost: No valuation required. Actual costs will emerge in future
valuations.
Member Cost: It is not uncommon for the cost to the member to exceed $5,000 for
each year of military service. After the contract has been amended,
the member may obtain cost information by contacting Member
Services Division.
The City of Azusa estimates that it has approximately six employees that might qualify and that
its cost will be approximately $30,000. Funds will be budgeted as required, under the allowance
for collective bargaining contracts.
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 for 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".
Attachments:
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RESOLUTION NO. 97-C69 /e e
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA,
CALIFORNIA, TO IMPLEMENT PROVISIONS OF INTERNAL REVENUE
CODE 414(h)(2) REGARDING EMPLOYEE PAIDONTRIBUTIONSuTO
PUBLIC EMPLOYEES' RETIREMENT SYSTEM fog-( (zeal Hie
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WHEREAS, the City Council of the City of Azusa has the authority to implement the
provisions of section 414 (h)(2) of the Internal Revenue Code (IRC); and
WHEREAS, the Board of Administration of the Public Employees' Retirement System
adopted its resolution re section 414(h)(2) on September 18, 1985; and
WHEREAS, the Internal Revenue Service has stated in December 1985 that the
implementation of the provisions of section 414(h)(2) IRC pursuant to the Resolution of the Board
of Administration would satisfy the legal requirements of section 414(h)(2) IRC; and
WHEREAS, the City Council of the City of Azusa has determined that, even though the
implementation of the provisions of section 414(h)(2) IRC is not required by law, the tax benefit
offered by section 414(h)(2) IRC should be provided to its employees who are members of the
Public Employees' Retirement System;
NOW, THEREFORE, BE IT RESOLVED:
Section 1. That the City Council of the City of Azusa will implement the provisions of section
414(h)(2) Internal Revenue Code by making employee contributions pursuant to California
Government Code section 20615.5 to the Public Employees' Retirement System on behalf of its
employees who are members of the Public Employees' Retirement System. "Employee
contributions" shall mean those contributions to the Public Employees' Retirement System which
are deducted from the salary of employees and are credited to individual employee's accounts
pursuant to California Code section 20615.5.
Section 2. That the contributions made by the City Council of the City of Azusa to the Public
Employees' Retirement System, although designated as employee contributions, are being paid by
the City Council of the City of Azusa in lieu of contributions by the employees who are members
of the Public Employees' Retirement System.
Section 3. That employees shall not have the option of choosing to receive the contributed
amounts directly instead of having them paid by the City Council of the City of Azusa to the
Public Employees' Retirement System.
Section 4. That the City Council of the City of Azusa shall pay to the Public Employees'
Retirement System the contributions designated as employee contributions from the same source
of funds as used in paying salary.
Section 5. That the amount of the contributions designated as employee contributions and paid
by the City Council of the City of Azusa to the Public Employees' Retirement System on behalf
of an employee shall be the entire contribution required of the employee by the Public Employees'
Retirement Law (California Government Code Section 20000, et seq.)
Section 6. That the contributions designated as employee contributions made by the City Council
of the City of Azusa to the Public Employees' Retirement System shall be treated for all purposes,
other than taxation, in the same way that member contributions are treated by the Public
Employees' Retirement System.
PASSED, APPROVED AND ADOPTED this 19'h day of May, 1997
/414M4R
I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the City Council
of the City of Azusa at a regular meeting thereof, held on the 19" day of May, 1997 by the
following vote of the Council:
AYES COUNCIL MEMBERS: Hardison,Stanford,Rocha,Beebe,Madrid
NOES COUNCIL MEMBERS: None
ABSENV COUNCIL MEMBERS: No
/
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Y CLERK r
r:ordnance\per,epmc.tax
RESOLUTION NO. 97-C69
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA,
CALIFORNIA, TO IMPLEMENT PROVISIONS OF INTERNAL REVENUE
CODE 414(h)(2) REGARDING EMPLOYEE PAID CONTRIBUTIONS TO
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
WiIEREAS, the City Council of the City of Azusa has the authority to implement the
provisions of section 414 (h)(2) of the internal Revenue Code (iRC); and
WHEREAS, the Board of Administration of the Public Employees' Retirement System
adopted its resolution re section 414(h)(2) on September 18, 1985; and
WHEREAS, the Internal Revenue Service has stated in December 1985 that the
implementation of the provisions of section 414(h)(2) IRC pursuant to the Resolution of the Board
of Administration would satisfy the legal requirements of section 414(h)(2) IRC; and
WHEREAS, the City Council of the City of Azusa has determined that, even though the
implementation of the provisions of section 414(h)(2) IRC is not required by law, the tax benefit
offered by section 414(h)(2) IRC should be provided to its employees who are members of the
Public Employees' Retirement System;
NOW, THEREFORE, BE IT RESOLVED:
Section 1. That the City Council of the City of Azusa will implement the provisions of section
414(h)(2) Internal Revenue Code by making employee contributions pursuant to California
Government Code section 20615.5 to the Public Employees' Retirement System on behalf of its
employees who are members of the Public Employees' Retirement System. "Employee
contributions" shall mean those contributions to the Public Employees' Retirement System which
are deducted from the salary of employees and are credited to individual employee's accounts
pursuant to California Code section 20615.5.
Section 2. That the contributions made by the City Council of the City of Azusa to the Public
Employees' Retirement System, although designated as employee contributions, are being paid by
the City Council of the City of Azusa in lieu of contributions by the employees who are members
of the Public Employees' Retirement System.
Section 3. That employees shall not have the option of choosing to receive the contributed
amounts directly instead of having them paid by the City Council of the City of Azusa to the
Public Employees' Retirement System.
Section 4. That the City Council of the City of Azusa shall pay to the Public Employees'
Retirement System the contributions designated as employee contributions from the same source
of funds as used in paying salary.
Section 5. That the amount of the contributions designated as employee contributions and paid
by the City Council of the City of Azusa to the Public Employees' Retirement System on behalf
of an employee shall be the entire contribution required of the employee by the Public Employees'
Retirement Law (California Government Code Section 20000, et seq.)
Section 6. That the contributions designated as employee contributions made by the City Council
of the City of Azusa to the Public Employees' Retirement System shall be treated for all purposes,
other than taxation, in the same way that member contributions are treated by the Public
Employees' Retirement System.
PASSED, APPROVED AND ADOPTED this 19`h day of May, 1997
AdtM4.49R
I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the City Council
of the City of Azusa at a regular meeting thereof, held on the 19h day of May, 1997 by the
following vote of the Council:
AYES COUNCIL MEMBERS: Hardison,Stanford,Rocha,Beebe,Madrid
NOES COUNCIL MEMBERS: None
ABSENV COUNCIL MEMBERS: No
A//' ,(7
Y CLERK
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) 4s - e
RESOLUTION NO. 97-C68
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 TIIE CITY OF AZUSA
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 20615.5 (9%Employer Paid Member Contributions
Converted to Payrate During the Final Compensation Period)and Section
21124 (Military Service Credit as Public Service) for local police
members."
NOW,THEREFORE, BE IT RESOLVED THAT:
Section 1. The City Council of the City of Azusa does hereby give notice of intention to
approve an amendment to the contract between the said governing body 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
Section 2. The City Clerk shall certify to the adoption of the Resolution.
APPROVED AND ADOPTED this 19''day of May, 1997.
/444 efF34(..-ce,P
OR
I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the City
Council of the City of Azusa at a regular meeting thereof, held on the 19''day of May, 1997 by
the following vote of Council:
AYES COUNCIL MEMBERS: Hardison,Stanford,Rocha,Beebe,Madrid
NOES : COUNCIL MEMBERS:None
ABSENT COUNCIL MEMBERS:jNone
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p/ord/9%epms
EXHIBIT
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, Anvil 5, 1994, June 30, 1995, April 4,
1996, July 14, 1996 and May 8, 1997 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 May
8, 1997, and hereby replaced by the following paragraphs numbered 1 through 14
inclusive:
1. All words and terms used herein which are defined in the ?ubiic Employees'
Retirement Law shall have the meaning as defined therein aniess otherwise
specifically ?rovided. "'Normal retirement age" shall mean age 55 for local
miscellaneous members, age 55 for local safety 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 ADDMONAL EXCLUSIONS
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 exciuned 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 Jaminry 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 ShAlI be determined in
accordance with Section 21354 of said Retirement Law, subject to the reduction
provided therein for service on and aper January 1, 1956, titre 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% az age 55 Full and Modified).
7. The percentage of final compensation to be provided for each year of =edited
prior and=cent 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 final compensation to be provided for each year of credited
prior and =rent 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 21382.5 (Fourth Level of 1959 Survivor Benefits) for local
miscellaneous members and local police members only.
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.
£ Section 21024 (Military Service Credit as Public Service), Statutes of
1976 for local miscellaneous members and local police members only.
Section 20615.5 (Employer Paid Member Contributions Converted to
Payrate During the Final Compensation Period) for local miscellaneous
members and local ponce members in the following groups and for the
specified percentage:
7% Local miscellaneous members.
9% Local police members.
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 police members of said Retirement
System.
12. Public Agency shall also contribute to said Retirement System as follows:
a. Per covered member. 5850 per month on account of the liability for the
1959 Survivor Benefits provided under Section 21382.5 of said
Retirement Law. Subject to annual change.) 1n 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 police 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 incinding 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 Pie costs of special valuations on account of
employees of Public Agency, and costs of the periodic investigation and .
valuations required by law.
1 ++..:.r
13. Contributions required of Public Agency and its employees cha11 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 chill 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 nay 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 COUNCU.
PUBLIC EMPLOYEES' RETIREMENT NT SYSTEM OF THE
CITY OF AZUSA
BY BY •
KENNETH W. MARZION, CHIRP PRESIDING OFFICE
ACTUARIAL &EMPLOYER SERVICES DIVISION
PUBLIC EMPLOYEES' SYSTEM
Wmess Dare
Attesc
Clerk
AMENDMENT
PERS-CON-702A(Rev.A961