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Home My WebLink AboutCC AG PKT 2003-02-10 #K AGENDA REPORT f/d6 DATE: February 10, 2003 9 0 6 - 3 TO: Honorable Mayor and City Council FROM: John B. Bahorski, City Manag SUBJECT: 2 -Year Retirement Service Credit SUNIlVIARY OF REQUEST: With the adoption of the attached resolution, Council will designate March 1, 2003 through August 27, 2003 (a 180 -day time frame) as the designated period in which eligible employees may voluntarily participate in the PERS Retirement Two Years Additional Service Credit program offered by the City. This action only sets the time frame for retirement. Additional retirement periods can be implemented at any time in the future, should Council wish to extend retirement date options. BACKGROUND: The Public Employees Retirement System (PERS) provides a mechanism whereby public agencies may provide a workforce reduction incentive program commonly referred to as Two Years Service Credit to eligible employees to encourage early retirement. This program is offered specifically for economic reasons — either because of impending mandatory transfers, or demotions and/or layoffs which could result in a change in the manner of performing services for the community. In 1994, the City Council amended the contract with Ca1PERS to include the Two Years Additional Service- Credit Amendment. The plan was offered at that time as the economic outlook was bleak and this was one method to reduce the workforce without layoffs. By adopting the attached resolution, Council establishes another window period during which eligible employees may retire. The designated period can be offered by classification, department or retirement plan. In 2002, Huntington Beach offered the workforce reduction program and over 40 employees retired last September. Other Orange County cities are considering the plan should the State's budget crisis severely impact their operating budgets. The service credit is offered on a voluntary basis only for any non - safety employee that is • 50 years of age or older and is vested in the PERS retirement system. While there is a cost involved for the City initially, thereis an associated savings by not filling the position and reducing the work force. Agenda Item 5 HOW DOES IT WORK? PERS retirement benefits are determined based on age and the number of years worked (service years) while contributing into the retirement system. A cost factor determined by PERS multiplied by the number of years of service calculates the percentage of salary to be received during retirement. The salary is based on the highest amount contributed in a 12 month period. The attached schedule explains this formula. Example 1: A 63 year old employee who has worked in the PERS retirement system for 25 years and retires in July, 2003, would received 60.45% of his/her salary. Under the service credit program, this employee would receive 65.29% of salary (almost an 8% increase) without having to work the additional two years. Clearly, the program is an incentive to encourage those individuals who are contemplating retirement in a couple of years to do so earlier. Example 2: a 53 year old employee who has worked in the PERS retirement system for 27 years and also retires July 1, 2003, would receive 47.03% of his/her salary. As in the previous example, salary is based on the highest 12 months of salary earned. Under the - service credit plan, this employee would receive 54% of salary — a significant increase, especially in a year or years when no or little salary increases would be expected. ADVANTAGES: • Method of encouraging voluntary workforce reduction • Positions may be kept vacant or backfilled in lesser position, thereby reducing labor costs significantly. - • Employees view 2 -year service credit as a positive, rather than negative option DISADVANTAGES: • May lose institutional memory of long -term employees • Will not know which positions will be impacted until employee retires • The manner in which services are provided to the community may change. FISCAL IMPACT: The Two Year Service Credit is designed to address the General Fund shortfall in FY 2003/04. It is one of several efforts underway to reduce expenditures. By offering this program, it is hoped the General Fund salary expenditures can be reduced by not filling vacant positions. Currently, employee salaries and benefits account for the major portion of all General Fund expenditures. The other efforts underway to reduce expenditures include a hiring freeze, developing additional revenue and reductions to departmental expenses. At the January 27 Council meeting, 13 employees were identified as meeting the criteria for the 2 -year service credit at a cost of $351,775 with commensurate savings. RECOMMENDATION: That Council adopt the attached resolution designating March 1, 2003 through August 27, 2003 as the time frame during which eligible non - safety employees may retire and participate in the PERS 2 -Year Additional Service Credit Program. Attachment: PERS Exhibit — Schedule of Final Compensation PERS 2 -Year Service Credit Informational Local Miscellaneous Members 2% at 55 Formula Exact Age And Percentage Of Final Compensation Age 50 51 52 53 54 55 56 57 58 59 60 61 62 63+ Benefit Factor 1.426 1.522 1.628 1.742 1.866 2.000 2.052 2.104 2.156 2.210 2.262 2314 2.366 2.418 Years Of Service 5 7.13% 1.61 % - , 8:14% 8.71'% ` 933% - 10.00 % -' 10.26% 4052% :`10:78 %' .1 :0595. •'11:31 %.' .1,1.57% •11.83% 12:09%3 6 8.56% 9.13% 9.77% 10.45% 11.20% 12.00% 12.31% 12.62% 12.94% 13.26% 13.57% 13.88% 14.20% 14.51% 7' 9.98% 10.65% ` 11.40 %' 12.19% 13 "06% x 036% - 14.73% . - 15.09 %:.15.47% 215`.83% '16:56 %: _ 16.93961 8 11.41% 12.18% 13.02% 13.94% 14.93% 16.00% 16.42% 16.83% 17.25% 17.68% 18.10% 18.51% 18.93% 1934% ' 9' ._ 12.83% 13 •14.65 % '15.68% • 16.79% '- 18.00%• 18.47% = 18:94% 19.40% 109% ; 2036_% • ; 20.83%;:, - 26.29 %. •'21:76% 10 14.26% 15.22% 16.28% 17.42% 18.66% 20.00% 20.52% 21.04% 21.56% 22.10% 22.62% 23.14% 23.66% 24.18% 111= • ; 16.74% - -17 ,1916% „20.53% , 22.00% •22.57% 23 %" 23.72 %•„ 24.31%: 24:88 %:25.45 %` 26:03 %-.26.60% 12 17.11% 18.26% 19.54% 20.9096 22.39% 24.00% 24.62% 25.25% 25.8796 26.52% 27.14% 27.77% 2839% 29.02% 13 : 18.54 % %„ 21.16% 22.65 % = 24:26 %. 26.00% 26.68.% 2735% . 28 :03% ,28:73% ; •29:41 % - • 30:08 %7•' 30.76% ',31:430; 14 19.96% 2131% 22.79% 2439% 26.12% 28.00% 28.73% 29.46% 30.18% 30.94% 31.67% 32.40% 33.12% 33.85% 15 - '2139 %• 22:83% ,24.42%... 26.13 %' 27.99% 30.00 %; 30.78% 31.56% . 32.34 %,.53.15% .33.93 % - 34 %t• 35 :49 % : 36'27% 16 22.82% 2435% 26.05% 27.87% 29.86% 32.00% 32.83% 33.66% 34.50% 35.36% 36.19% 37.02% 37.86% 38.69% •.24.24% •25:87% 27 %x' %,. - 31:72 %. 34.00%` 34:88 %: -35.77% 36.65 % ` %• '38:.45 % -* 1934% "1P2% _41. 11. %; 18 25.67% 27.40% 29.30% 31.36% 33.59% 36.00% 36.94% 37.8796 38.81% 39.78% 40.72% 41.65% 42.59% 43.52% 19' '27 :09 %; 28.92 %: °30.93 %`•••33':10 %. - 35' 3,8.00% 38.99 %. 39.98 % •40:96 %; - ;41:9996;- 0.98 % 43:97 %;,,44:95% 45;94%_ 20 28.52% 30.44% 32.56% 34.84% 3732% 40.00% 41.04% 42.08% 43.12% 44.20% 45.24% 46.28% 47.32% 4836% 2'1 29.95••% ` :3'1.96 %' ' 49% - .'36.58% ' 39:19 %; "42.00%i 43:09 %. :, 44.18% -45.28 %.• 22 31.37% 33.48% 35.82% 3832% 41.05% 44.00% 45.14% 46.29% 47.43% 48.62% 49.76% 50.91% 52.05% 53.20% 23 :.''32:80 %. `35`.0.1 %'': 37.44 % - - '40.07 %;'42.92.96 .46.00% 47 :20 %; %'; - 49.59 %,;50:83 %.. - 5203% .'53:22 % " .,54 :42 %•• °''55:41% 24 34.22% 36.53% 39.07% 41.81% 44.78% 48.00% 49.25% 50.50% 51.74% 53.04% 54.29% 55.5496 56.78% 58.03% 35 :65 % 38:05% 40:70 %. '.4 , 50.00% 51.30% - 520% 53.90% ,- 55.25 %, :,56.55% ; 57 ; 85 * ;59 :15 %; _ 60 :45 %'• 26 37.08% 39.57% 4233% 45.29% 48.52% 52.00% 53.35% 54.70% 56.06% 57.46% 58.81% 60.16% 61.52% 62.87% 27 •38 :50 %• '41.09 %; ,43.96 %.•,•47 ' 50.38% - 54.00% 55.40 %.: 56.81%.,58.21. %;' 59 :67 % %,. • 62;4896' :63,88 %;:. 65 :29% 28 39.9396 42.62% 45.58% 48.78% 52.25% 56.00% 57.46% 58.91% 6037% 61.88% 6334% 64.79% 66.25% 67.70% : -29 4135 %_ - 14'444% :.4,7:219(0': 5052 %, ' 54 :11% 58.00 % -- 59.51% •,6.1.02 %• %' :. ,64 :09• %'• .,65;60 %:`67;1'1 9c1 %';'70:129 30 '42.7896 45.66% 48.84% 52.26% 55.98% 60.00% 61.56% 63.12% 64.68% 6630% 67.86% 69.42% 70.98% 72.54% 31r "' •44.71 %' - :47:18% :50:47 %; : 54.00 % ,57.85 %162.00% 63.61 % 65.22% - 66.84 % -,_ 68:5.1 %'•: :70;1.2 % - • -71:73- %:,' 73:35 % 74 :96 %` 32 45.63% 48.70% 52.10% - 55.74% 59.71% 64.00% 65.66% 67.33% 68.99% 70.72% 7238% 74.05% 75.71% 7738% 33 ' 41.06 %'_ 50.23 % 53:72 %' : % "•61• :58% - 66.00% 67 :72 %'• '69 :43% ' 71.15 %: ,72:93% i `.74:65 %;' 76 :36%" • 78.08%'• 34 - 51.75% 5535% 59.23% 63.44% 68.00% 69.77% 71.54% 7330% 75.14% 76.91% 78.68% 80.44% 82.21% 35' ; - 56.98 % - • = 60 :97% • 65 :31% • 70.00% 11.82% ••73 :64 %,' 75:46 %, - 773,5% :-79:1796 80.99 %. ;82:81% ' 84.63 %, 36 - - - 62.71% 67.18% 72.00% 73.87% 75.74% 77.62% 79.56% 81.43% 8330% 85.18% 87.05% • . • " - • .- 69.04% ' 74.00% • 75.92% 77.85 %. 7.9.7,7%. 11:77%:'- 83.69% • ,85.62 %.,.; 87.54,96 , 89:479 38 - - - - - 76.00% 77.98% 79.95% 81.93% 83.98% 85.96% 87.93% 89.91% 91.88% 39 - 80.03% 82.06% 84.08% 86.19 %. 88.22% , 90.25% • 92 :27 96,.. 94.30% 40+ - - - - - - - 84.16% 86.24% 88.40% 90.48% 92.56% 94.64% 96.72% PERS - PUB -5F to be used with PUB 5 folder January 2000 9. Section 20903 Two Years Additional Service Credit An agency may amend its contract to provide two years additional service credit to members who retire during a designated period because of impending mandatory transfers, layoffs, or demotions and the following requirements are met: a. The member is employed in a specified job classification, department, or other organizational unit and retired within the period designated by the governing body. The designated period must be subsequent to the effective date of the contract amendment and can not be less than 90 nor more than 180 days in length. (The benefit cannot be provided on the basis of employee organization or non - represented groups). b. The governing body must certify that it is electing to be subject to the provisions of this section due to mandatory transfers, layoffs and /or demotions that constitute at least one percent of the job classification, department, or organizational unit. c. The governing body must certify that it is the intention at the time Section 20903 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 work force of such department or organizational unit. d. The governing body must certify that it 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. e. The governing body must transmit an amount to the Retirement Fund that is the actuarial equivalent of the difference between the allowance the member will receive and the allowance the member would have received without the additional service credit. • To be eligible for this service credit, a member must have at least five years of service credit, be in employment status with the providing agency for at least one day during the designated period and retire during the designated period. The member's retirement date may not be the first day of the designated period. A member cannot receive credit under this section if the member receives any unemployment insurance payments during the designated period. If'the retired member subsequently reenters membership, the additional service credit is forfeited. Employer Cost: The agency will receive an invoice for the exact cost after all eligible members have received the additional service credit. Payments may be remitted over a 2 -year period with the minimum of annual installments. All accounts, except lump sum payments remitted within 30 days of billing, will be subject to interest assessment at the current employer- crediting rate. Member Cost: None. NOTE: In addition, there is a $10.00 actuarial valuation fee for each member who retires during the designated period and receives the additional service credit. PERS- CON-40 (Rev. 9/02) page 7 CITY COUNCIL . OF THE CITY OF SEAL BEACH RESOLUTION TO GRANT ANOTHER DESIGNATED PERIOD FOR TWO YEARS ADDITIONAL SERVICE CREDIT WHEREAS, the City Council of the City of Seal Beach is a contracting Public Agency of the Public Employees' Retirement System; and WHEREAS, said Public Agency desires to provide another designated period for Two Years Additional Service Credit, Section 20903, based on the contract amendment included in said contract which provided for Section 20903, Two Years Additional Service Credit, for eligible members; NOW, THEREFORE, BE IT RESOLVED, that said City Council does seek to add another designated period, and does hereby authorize this Resolution, indicating a desire to add a designated period from / / V / ' c r r c � i ; o 2O o , � through 4 c , , r 7 ` c O a3 for ' eligible i-0 /cc e0/4 h ee 4 5 members ih �� 0 q 1 ...9 'e /iie, ' / p/ 0v • Adopted and approved this day of . CITY COUNCIL OF THE CITY OF SEAL BEACH BY Presiding Officer Attest: Clerk/Secretary (Rev. 1/96)