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Home My WebLink About2011/01/25 Item 5CITY COUNCIL AGENDA STATEMENT ~~~ CITY OF CHULA VISTA JANUARY 25, 2011Item .S ITEM TITLE: REPORT OF INTENTION TO OFFER TO LOCAL PUBLIC SAFETY POLICE WHO ARE MEMBERS OF THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM (CALPERS) ANOTHER OPPORTUNITY TO RETIRE WITHIN A DESIGNATED PERIOD AND RECEIVE TWO YEARS ADDITIONAL SERVICE CREDIT PURSUANT TO GOVERNMENT CODE §20903 SUBMITTED BY: DIRECTOR OF HUM RESOURCES .K~~~ REVIEWED BY: CITY MANAGER ASSISTANT CITY~GIANAGER `-7 ~ 4/STHS VOTE: YES ~ NO ~X SUMMARY In an effort to significantly reduce Fiscal Years 2012 General Fund expenditures and to avoid impending mandatory transfers, layoffs and demotions, it is the City's intent to offer the Ca1PERS Two Years Additional Service Credit benefit option as an incentive to retirement to all Local Public Safety Police employees covered under the Citys contracts with Ca1PERS. This report is being presented to meet Ca1PERS' requirement that the estimated additional employer contributions, which will be required in the future for providing the two years service credit, be disclosed prior to the adoption of the resolution implementing the option. The resolution will be presented for adoption at the February 8, 2011, Council meeting. ENVIRONMENTAL REVIEW Not applicable. RECOMMENDATION That Council accept this report satisfying the cost disclosure requirements under Government Code §7507. 5-1 JANUARY 25, 2011, Item ~ Page 2 of 5 BOARDSlCOMMISSLON RECOMMENDATION Not applicable. DISCUSSION On October 16, 2007, the City amended both the Miscellaneous and Safety contracts between the Board of Administration of the California Public Employee's Retirement Boazd (Ca1PERS) and the City of Chula Vista to provide the optional Two Years Additional Service Credit benefit (G.C. §20903). Since that time the City has offered the benefit on five occasions as part of an early retirement incentive to qualified employees due to impending layoffs, mandatory transfers and demotions. Below is a summary of the retirement incentive packages that have been offered: ~. ~ ~~ ., ,. - ~~ • Medical incentive through All Miscellaneous 12/31/09 if retiring between and Police and 11/08/07- 11/08/07-12/31/07 62 1 10/16/2007 Fire Safety 02/05/08 Medical incentive though members !?/31/08 if retiring 01/01/08- 02/05/08 All Miscellaneous Medical incentive through 2 04/22/2008 members and 05/05/08- 12/31/09 if retiring 05/05/08- 18 Police and Fire 08/05/08 06/05/08 only managers Medical incentive through AIL Miscellaneous 12/31/ 10 if retiring O 1 /01/09- andPolice and 12/31/08- 03/27/09 33 3 12/16/2008 Fire Safety 06/26/09 Medical incentive through members 12/31/09 if retiring 03/28/09- 06/26/09 • Medical incentive for two calendar years if retiring Under All Miscellaneous the Two Additional Years 4 07/14/09 and Police Safety 07/15/09- Service Credit 10 members 10/12/09 Medical incentive for four calendar years if normal retirement 5 05/04/10 Specifiedjob OS/OS/10- No medical incentive 6 classifications of 08/02/10 the Miscellaneous and Local Safety Fire members TOTAL 129 Due to the continuing budgetary challenges for Fiscal Years 2011 and 2012 despite the layoffs, mandatory transfers and demotions, it is recommended that the City again offer the Two Years Additional Service Credit option, this tune to its Public Safety Police members. 5-2 JANUARY 25, 2011, Item 5 Page 3 of 5 It is further recommended that the designated window for these employees to take advantage of this opportunity be from February 9, 2011 through May 9, 2011. The City must certify that any vacancies created by individuals taking the service credits pursuant to G.C. §20903, or at least one vacancy in any position in any department or other organizational unit, remain permanently unfilled, thereby resulting in an overall reduction in the workforce of the department or organizational unit. Window Period In order for an employee to qualify for the additional service credit they must retire within the period designated by the governing body. The designated period cannot be less than 90 days nor more than 180 days in length. In order to achieve savings in a timely mamier, and to avoid further layoffs, transfers and demotions, staff is recommending the shorter ninety- day (90) window period from February 9, 2011 through May 9, 201 I . EliQibili For an employee (Ca1PERS member) to be eligible to receive the additional two years credit the following requirements must be met: • The member must have at least five years of Ca1PERS service credit; • The member must be employed for at least one day during the designated period; • The member must retire during the designated period, however, the member's retirement date may not be the first day of the designated period; • The 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. DECISION MAKER CONFLICT Staff has reviewed the decision contemplated by this action and has determined that it is not site specific and consequently the 500 foot rule found in California Code of Regulations §18704.2(a)(1) is not applicable to this decision. CURRENT YEAR FISCAL IMPACT The added employer cost to the retirement fund for all eligible employees who retire during the designated period will be included in the contracting agency's employer contribution rate. However, the amount of the increase in the employer contribution rate will show two years after the end of the designated period. Therefore, there is no anticipated additional cost in the current fiscal year. The total annual salary savings if all eligible employees take advantage of the Early Retirement Incentive plan is $L~87 million. Based on experience, staff believes the salary savings will be less. 5-3 JANUARY 25, 2011, Item Page4of5 ONGOING FISCAL IMPACT The "additional employer contributions" that are disclosed here are an estimate of the present value of additional employer contributions which will be required in the future for providing the two yeazs service credit. The amount is calculated based on the eligible members' annual reportable compensation, a cost factor established by CaIPERS actuaries and the fact that the City contracts for the Post-Retirement Survivor Allowance (Survivor Continuance). The "additional employer contributions" will be paid by the City 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 yeazs, unless it is prepaid. The calculations below satisfy the disclosure requirements of Government Code §7507. The actual present value of additional contributions may differ from the estimate for two reasons: 1) Some of the members who are eligible to retire and receive the two years service credit (and who are included in the estimate) may choose not to retire. Staff believes the cost will be less. 2) There may be an additional cost to the City (called an experience loss) if the total number of members retiring in the fiscal year exceeds the number predicted by the actuarial assumptions. An experience loss occurs very often when the two years service credit is offered because some members retire who would have otherwise waited until later years. Estimated Cost of Additioual Employer Coutributious (Based on 100% participation) Additional Employer Contribution: $1.37 million (over twenty years) Additional Annual Employer Contribution: $103,696 Rate Increase in Employer Contribution: 0.52% Based on the survey conducted by the Safety Police group, there were eleven (11) eligible employees that may take the Early Retirement Incentive. The estimated costs are as follows: (Based on 11 participants) Additional Employer Contribution: $816,387 (over twenty yeazs) Additional Annual Employer Contribution: $61,660 Rate Increase in Employer Contribution: 0.31% There are no costs to the employee/member with this option. 5-4 JANUARY 25, 2011, Item Page 5 of 5 Estimated Net Annual Savings CaIPERS requires publishing potential costs based on 100% participation of all eligible members. The total annual salary of all eligible employees is $1.587 million. However, assuming all eleven employees would take advantage of the Eazly Retirement Incentive, the estimated annual base salary savings would be approximately $947,676. The net annual savings would be $886,016: (Based on 11 participants) Annual Salary Savings: $947,676 Additional Annual Employer Contribution: $ 61,660 Estimated Net Annual Savings: $886,016* *This amount does not include annual benefet costs. A final list of employees who apply for retirement pursuant to the offer will be presented to CaIPERS after the expiration of the application window. The actual cost/savings can be more accurately estimated at that time. CaIPERS Process The process set out by Ca1PERS to offer this benefit is very specific. While a contract amendment between the City of Chula Vista and Ca1PERS to offer this additional designated period is not required, the City is required to announce its intent to grant another designated period and to disclose the estimated cost of that offering at a public meeting. This report will be followed in no less than two weeks, a waiting period required by CaIPERS, with a request for a Council Resolution certifying that as our governing body the Council is electing to be subject to the provisions of Government Code §20903 Two Years Additional Service Credit. 5-5