CITY COUNCIL: Ordinance Amending Provisions of Municipal Code Section 2.56 (Retirement System) Establishing a 2% at 50, 3-Year FAS Retirement Plan for Safety Employees Hired On or After April 15, 2012

Meeting Date: March 6, 2012
Prepared by: Jason Stilwell

City Council
Agenda Item Summary

Name: Consideration of an Ordinance amending provisions of Municipal Code Section 2.56 (Retirement System) establishing a 2% at 50, 3-Year FAS Retirement Plan for Safety Employees hired on or after April15, 2012. (Second reading)

Description: On November 1, 2011, the City Council approved a Side Letter Agreement between the City of Carmel-by-the-Sea and the Carmel Police Officers' Association (POA), and a sidebar agreement between the City of Carmel-by-the-Sea and the International Association of Firefighters (IAFF). These actions established a new Retirement Benefit Tier (2% at 50, F AS 3) for safety employees. In order to implement this benefit, however, the City's contract with CalPERS must be amended.

At the February 7, 2012 Council meeting, Resolution 2012-11 (Resolution of Intent) was adopted and Council held the first reading of the ordinance to amend the CalPERS contract and to establish the 2% at 50, F AS 3 retirement plan for Safety Employees hired by the City on or after April 15, 2012.

Overall Cost: There are no immediate savings anticipated from the implementation of this twotier system as the reduced contribution rate applies only to new hires. Long-term savings however, will be realized as staff turnover occurs. The employer contribution rate will be 7.73% of reportable earnings for employees entering membership for the first time in the Safety classification after the effective date of this amendment to the contract.

Staff Recommendation: Adopt the Ordinance upon second reading.

Important Considerations: The ordinance will become effective April 5, 2012. As the effective date of this amendment cannot be earlier than the first day of a payroll period following the effective date of the final ordinance, implementation of the 2% at50, FAS 3 Retirement Plan will be April15, 2012. Employees in the Safety group hired by the City on or after that date will be fall under the new retirement plan.

Decision Record: Council adopted Resolution 2012-11 and held the first reading of this ordinance to amend the CalPERS contract and to establish the 2% at 50, FAS 3 retirement plan for Safety Employees hired by the City on or after April15, 2012.

Reviewed by:

Jason Stilwell, City Administrator

CITY OF CARMEL-BY-THE-SEA
STAFF REPORT
TO: MAYOR MCCLOUD AND MEMBERS OF THE CITY COUNCIL
FROM: JASON STILWELL, CITY ADMINISTRATOR
DATE: 6 MARCH 2012
SUBJECT: CONSIDERATION OF AN ORDINANCE AMENDING PROVISIONS OF MUNICIPAL CODE SECTION 2.56 (RETIREMENT SYSTEM) ESTABLISHING A 2% AT 50, 3-YEAR FAS RETIREMENT PLAN FOR SAFETY EMPLOYEES HIRED BY THE CITY OF CARMEL-BY-THE-SEA ON OR AFTER APRIL 15, 2012 (SECOND READING)
.
RECOMMENDATION
The recommendation is for Council to adopt this Ordinance upon second reading.

DISCUSSION
On February 7, 2012, the City Council adopted the proposed ordinance upon first reading. The ordinance would take effect 30 days after the date adopted by the City Council, however the effective date of the contract amendment cannot be earlier than the first day of a payroll period following the effective date of the final ordinance.

Accordingly, the implementation date of the 2% at 50 3-year FAS Retirement Plan would be April 15, 2012. This will affect any sworn officer entering membership with the City of Carmel after the effective date of this amendment to the contract unless the officers are rehired within one year from their separation date. The proposed ordinance to adopt the 2% at 50, three-year final average compensation Retirement Plan and amend the CalPERS contract is part of the final steps required by CalPERS prior to implementation.

FISCAL IMPACT
There are no immediate savings anticipated from the implementation of this two-tier system as the reduced contribution rate applies only to new hires. Long term savings will be realized, however, as staff turnover occurs. The employer contribution rate will be 19.169% of reportable earnings for local safety members entering membership for the first time in the safety classification after the effective date of this amendment to the contract.

CITY OF CARMEL-BY-THE-SEA
CITY COUNCIL
ORDINANCE 2012-3
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA, AMENDING PROVISIONS OF MUNICIPAL CODE SECTION 2.56 (RETIREMENT SYSTEM) AND APPROVING AN AMENDMENT TO THE CONTRACT BETWEEN THE BOARD OF ADMINISTRATION OF THE PUBLIC EMPLOYEES’ RETIREMENT SYSTEM AND THE
CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA, WHICH PROVIDES FOR A 2% AT 50 THREE-YEAR FINAL COMPENSATION RETIREMENT PLAN FOR SAFETY MEMBERS HIRED BY THE CITY OF CARMEL-BY-THE-SEA ON OR AFTER APRIL 15, 2012
_____________________________________________________________________________
WHEREAS, the California Public Employees’ Retirement Law permits the participation of public agencies and their employees in the California 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;

WHEREAS, the City of Carmel-by-the-Sea entered into its original contract with the Board of Administration of the California Public Employees’ Retirement System, effective January 1, 1955; and

WHEREAS, on February 7, 2012, the City Council adopted Resolution No. 2012-11 stating its intent to adopt an ordinance on March 6, 2012, approving an amendment to the City’s contract with CalPERS and describing the proposed contract amendment;

WHEREAS, the contract amendment provides for a Different Level of Benefit, pursuant to Government Code Section 20475, by implementing, pursuant to Government Code Section 21362, a 2% at 50 Retirement Plan, and pursuant to Government Code Section 20037, a threeyear final compensation, which shall apply to local safety members hired by the City of Carmel-by-the-Sea on or after April 15, 2012, the effective date of the contract amendment; and

WHEREAS, on February 7, 2012, the City Council introduced for first reading Ordinance 2012-3 approving the proposed amendment to the City of Carmel-by-the-Sea’s contract with CalPERS.

NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Carmel-by-the-Sea as follows:

SECTION 1. That the amendment to the contract between the City Council of the City of Carmel-by-the-Sea and the Board of Administration of the California Public Employees’ Retirement System to provide a Different Level of Benefit, pursuant to Government Code Section 20475, by implementing, pursuant to Government Code Section 21362, a 2% at 50 Retirement Plan and pursuant to Government Code Section 20037, a three-year final compensation, which shall apply to local safety members hired by the City of Carmel-by-the-Sea on or after the effective date of April 15, 2012, as set forth in the full text of the amendment attached hereto, is hereby approved.

SECTION 2. The City Administrator of the City of Carmel-by-the-Sea, or his designee, is hereby authorized, empowered, and directed to execute said amendment for and on behalf of the City of Carmel-by-the-Sea.

SECTION 3. The City Clerk shall attest to the execution of the approved amendment to the contract, and shall certify to the passage and adoption of this ordinance, causing it to be posted as provided by law, and it shall be in full force and effect 30 days after its adoption.

PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA
this 6th day of March 2012, by the following roll call vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

SIGNED:

______________________
SUE McCLOUD, MAYOR

ATTEST:

_____________________
Heidi Burch, City Clerk

Exhibit "A"

CalPERS
California Public Employees' Retirement System

AMENDMENT TO CONTRACT
Between the Board of Administration
California Public Employees' Retirement System
and the City Council
City of Car.mel-By-The-Sea

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 January 1, 1955, and witnessed December 13, 1954, and as amended effective October 1, 1960, July 1, 1968, July 1, 1973, March 16, 1983, July 1, 1990, June 5, 1993, June 5, 1997, October 16, 1998, January 7, 2000, September 7, 2001, July 1, 2003 and September 5, 2003 which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows:

A. Paragraphs 1 through 12 are hereby stricken from said contract as executed effective September 5, 2003, and hereby replaced by the following paragraphs numbered 1 through 15 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 entering membership in the miscellaneous classification on or prior to the effective date of this amendment to contract, age 60 for local miscellaneous members 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 January 1, 1955 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:

NO ADDITIONAL EXCLUSIONS

6. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member entering membership in the miscellaneous classification on or prior to the effective date of this amendment to contract shall be determined in accordance with Section 21354 of said Retirement Law (2% at age 55 Full)

7. 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).

8. The percentage of final compensation to be provided for each year of credited prior and current service as a local safety member entering membership in the safety classification on or prior to the effective date of this amendment to contract shall be determined in accordance with Section 21362.2 of said Retirement Law (3% at age 50 Full).

9. The percentage of final compensation to be provided for each year of credited current service as a local safety member entering membership for the first time in the safety classification after the effective date of this
amendment to contract shall be determined in accordance with Section 21362 of said Retirement Law (2% at age 50 Full).

10. Public Agency elected and elects to be subject to the following optional provisions:

a. Section 21222.1 (One-Time 5% Increase - 1970). Legislation repealed said Section effective January 1, 1980.

b. Section 20042 (One-Year Final Compensation) for local miscellaneous members and local safety members entering membership on or prior to the effective date of this amendment to contract.

c. Section 21574 (Fourth Level of 1959 Survivor Benefits).

d. Section 21024 (Military Service Credit as Public Service).

e. Section 21583 (Additional Opportunity to Elect 1959 Survivor Benefits).

f. Section 20965 (Credit for Unused Sick Leave).

g. Section 20903 (Two Years Additional Service Credit) for local miscellaneous members only.

h. Section 20475 (Different Level of Benefits). Section 21353 (2%@ 60 Full formula) and Section 20037 (Three-Year Final Compensation) are applicable to local miscellaneous members entering membership for the first time in the miscellaneous classification after the effective date of this amendment to contract. Section 21362 (2% @ 50 Full formula) and Section 20037 (ThreeYear Final Compensation) are applicable to local safety members entering membership for the first time in the safety classification after the effective date of this amendment to contract.

11. Public Agency, in accordance with Government Code Section 20790, ceased to be an "employer" for purposes of Section 20834 effective on March 16, 1983. 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.

12. 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.

13. 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 2157 4 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.

14. 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.

15. 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


BY __________ ___
KAREN DE FRANK, CHIEF
CUSTOMER ACCOUNT SERVICES DIVISION
PUBLIC EMPLOYEES' RETIREMENT SYSTEM




CITY COUNCIL
CITY OF CARMEL-BY-THE-SEA



BY __________ ___
PRESIDING OFFICER


Witness Date

Attest:

Clerk




Attachment 3

CALIFORNIA PUBUC EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Branch
Public Agency Contract Services
(888) CalPERS {225-7377)


SUMMARY OF MAJOR PROVISIONS
2% @ 60 Fonnula (Section 21353)
Local Miscellaneous Members


To be eligible for service retirement. a member must be at least age 50 and have five years of
CaiPERS credited service. There is no compulsory retirement age.