HomeMy WebLinkAboutAGENDA REPORT 2008 0820 CC REG ITEM 09CITEM
CITY OF mooRPARK, CALIFORNIA
city Council Meeting
of
ACTION ._4-'
BY:-
MOORPARK CITY COUNCIL
AGENDA REPORT
TO: Honorable City Council
FROM: Deborah S. Traffenstedt, Administrative Services Director : 7F
DATE: August 12, 2008 (CC Meeting of 8/20/08)
SUBJECT: Consider Authorizing Two Years Additional Service Credit Retirement
Incentive Pursuant to Government Code Section 20903 and Consistent
with the City's Contract with the California Public Employees' Retirement
System (CaIPERS)
BACKGROUND
On July 2, 2003, the City Council adopted Ordinance No. 294, amending the CaIPERS
contract consistent with the requirements of Government Code Section 20903 (commonly
referred to as the "Golden Handshake "). This benefit is intended to be utilized by CaIPERS
contracting agencies to encourage reduction of staffing levels, when needed due to
impending curtailment of or change in the manner of performing service. The benefit currently
offered by the Golden Handshake is two years of additional service credit.
As a result of the adoption of Ordinance No. 294, the City's current contract with CaIPERS
allows the City Council to adopt a resolution affirming that the two years of additional service
credit retirement incentive is to be offered. The process requires the scheduling of a "public
meeting" agenda item, including disclosure of the costs to the public agency, and designation
of the job classification(s), department(s), or unit(s) eligible for this benefit. The CaIPERS
process also requires the City Council to adopt a resolution at a subsequent meeting (not less
than two weeks following the public meeting agenda item), which resolution must include a
designation of the time period of 90 to 180 days during which an eligible member must retire
to receive the additional service credit.
DISCUSSION
The future annual costs and the increase in retirement benefits are generally disclosed in the
CaIPERS "Procedures for Calculation of Additional Employer Contributions and Funding
Therefore to be Disclosed at the Public Meeting." At this time, staff is proposing to designate
the job classification of Senior Management Analyst in the City Manager's Office. There are
Honorable City Council
August 20, 2008, Regular Meeting
Page 2
two potentially eligible employees, although only one employee has expressed an interest in
this opportunity at this time. As previously discussed with the City Council during the Fiscal
Year 2008/2009 Budget deliberations, staff is recommending the use of this employment
reduction strategy, due to reduced revenue concerns. The continuing budget concerns
require a proactive approach to reducing staff costs.
The total estimated cost to the City for the two years service credit for the Senior
Management Analyst position in the City Manager's Office is shown in Attachment 1, and is
approximately $55,339.65- $56,327.86 per position (the amount varies depending on age at
time of retirement). This amount is calculated based on the formula in the CalPERS
procedures manual, and is an estimate of the present value of additional employer
contributions which will be required in the future for providing the two years service credit.
The cost of the two years additional service credit will be included in the City's employer
contribution rate commencing with the fiscal year starting two years after the end of the
designated period. The increase in the employer contribution rate may continue for as long
as 20 years. The increase in the City's contribution rate percentage is generally estimated to
be a maximum of .00154677 if both eligible employees retired, based on the formula in the
CalPERS procedures manual. The City's CalPERS employer contribution rate for 2008 is
11.607 %. The contribution rate varies annually, based on various factors, including
investment returns (for example, the 2008 rate is actually lower than the rates in 2006 and
2007). The cost of the two years additional service credit benefit is offset bythe elimination of
the position and the reduction in staff costs.
Please note that pursuant to Government Code Section 20903 (and following a public
meeting), if the City Council determines to adopt a resolution affirming that the two years of
additional service credit retirement incentive is to be offered, that resolution will need to
include the following certification:
• That the City Council is electing to be subject to the provisions of Government Code
Section 20903 due to mandatory transfers, layoffs and /or demotions that constitute at
least one percent of the job classification, department, or organizational unit.
• That it is the City Council's intention at the time Section 20903 of the Government
Code becomes operative that any vacancies created by retirements under this section
or at least one vacancy in any position in any department or organizational unit shall
remain permanently unfilled, thereby resulting in an overall reduction in the workforce
of such department or organizational unit.
• That the City has complied with the provisions of Government Code Section 7507 and
has disclosed the additional employer contributions and the funding of those employer
contributions, at a public meeting.
For the purposes of the first two certifications, as listed above, the City Manager's Office is the
organizational unit for the purposes of determining eligibility with the provisions of
Government Code Section 20903, and the intent is to reduce overall City staffing by any
vacancy created by a retirement pursuant to Government Code Section 20903. The required
disclosure pursuant to Government Code Section 7507 is accomplished by disclosing an
estimate of the present value of the additional employer contributions, which is included in this
report. The disclosure is required to be made at least two weeks prior to the adoption of an
increase in any retirement plan benefit.
Honorable City Council
August 20, 2008, Regular Meeting
Page 3
STAFF RECOMMENDATION
Direct staff to schedule for the September 3, 2008, regular meeting consideration of adoption
of a resolution to grant another designated period for two years additional service credit
retirement incentive for designated eligible employees.
Attachment: Procedures for Calculation of Additional Employer Contributions and Funding
Therefore to be Disclosed at the Public Meeting
;_ ?`)61�
Honorable City Council
August 20, 2008, Regular Meeting
Page 4
ATTACHMENT 1
Procedures for Calculation of "Additional Employer Contributions"
and Funding Therefore to be Disclosed at the Public Meeting
(Calculations are shown with italic type and bold font, below)
The "additional employer contributions" that the agency discloses at its public meeting is
an estimate of the present value of additional employer contributions which will be required
in the future for providing the two years service credit. This amount is calculated based on
the member's annual reportable compensation, the cost factor and whether the agency's
contract provides the Post - Retirement Survivor Allowance (Survivor Continuance) and /or
an increased Cost -of- Living Allowance of 3 %, 4% or 5 %. The "additional employer
contributions" is calculated as follows:
1. Identify all individuals who meet the minimum eligibility for retirement and who are
employed in the designated classification, department or organizational unit.
Senior Management Analyst, City Manager's Office (2 employees potentially
eligible)
2. Determine the annual pay rate for each person. "Payrate" indicates that amount of
compensation a member is paid for a full unit of time. Always use the member's FULL
TIME pay rate.
$98,820.80 (x 2 employees)
3. Determine the age for each person and locate the appropriate factor on the Cost
Factor Chart.
COST FACTOR CHART
MISCELLANEOUS MEMBERS
4. Multiply the annual pay rate by the cost factor, (annual pay rate) X (cost factor) _
estimated cost.
$98,820.80 x.56 cost factor = $ 55,339.65
$98,820.80 x.57 cost factor= $ 56,327.86
$111,667.51
'_ Z).
2% @ 60
2% @ 55
2.5% @ 55
2.7% @ 55
3% @ 60
formula
formula
formula
formula
formula
Ages
All
All
All
All
All
50 -54
0.35
0.47
0.63
0.65
0.63
55 -59
0.44
0.56
0.67
0.72
0.72
60 -64
0.55
0.57
0.61
0.66
0.73
65+
0.53
0.53
0.54
0.59
0.65
4. Multiply the annual pay rate by the cost factor, (annual pay rate) X (cost factor) _
estimated cost.
$98,820.80 x.56 cost factor = $ 55,339.65
$98,820.80 x.57 cost factor= $ 56,327.86
$111,667.51
'_ Z).
Honorable City Council
August 20, 2008, Regular Meeting
Page 5
5. Determine whether your agency's contract provides for the Post - Retirement
Survivor Allowance. If yes, proceed to step #7.
NA
6. If your agency's contract does not provide for the Post - Retirement Survivor
Allowance, multiply the value determined in step #4, above, by 0.95.
$111,667.51 x 0.95 = $106,084.13
7. Determine whether your agency's contract provides for the increased Cost -of- Living
Allowance of 3 %, 4% or 5 %. If not, no further calculations are needed.
8. If your agency's contract provides the 3 %, 4 %, or 5% cost -of- living allowance,
multiply the value determined above by 1.09 to estimate the cost of providing the
additional service credit.
NA
The "additional employer contributions" are paid by the agency through an increase in the
employer contribution rate, starting two fiscal years after the end of the designated period.
The increase in the employer contribution rate may continue for as long as 20 years.
To estimate the increase in the employer contribution rate percent:
1) Take the "additional employer contributions" calculated above, and
2) First divide by 13.24 (the 20 -year amortization factor), and
$106,084.13 / 13.24 (20 -year amortization factor) = $8,012.3965
3) Then divide by annual payroll of the plan.
$8,012.3965 / $5,180,243 (City's current annual payroll for CaIPERS Retirement) _
.0015467 (This is the estimated increase in the employer contribution rate based on
two positions. If only one employee retires during the designated filing period, the cost
would be approximately one -half of the identified amount.)
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