HomeMy WebLinkAbout5/16/2001 - STAFF REPORTS (20) Date: May 16, 2001
To: City Council
From: Director of Human Resources via City Manager
SUBJECT: CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM
POLICE SAFETY EMPLOYEES
RECOMMENDATION:
It is recommended that City Council give notice of its intention to approve an Amendment to
the Contract between the Board of Administration of the California Public Employees'
Retirement System (CaIPERS)and the City Council of the City of Palm Springs.
SUMMARY:
City Council adopted Resolution 19873 on July 19, 2000, which approved a Memorandum
of Understanding with the Palm Springs Police Officers Association (PSPOA). Article 34.1
of this Memorandum of Understanding agrees to contract with CaIPERS for the 3% @ 55
Full formula for members of the PSPOA effective June 2001.
BACKGROUND:
Representatives of the Palm Springs Police Officers Association (PSPOA) representing the
Police Safety Unit, met with the Municipal Employee Relations Representative (MERR),
representative of the City of Palm Springs. On July 19, 2000, the PSPOA signed a
Memorandum of Understanding, which agreed to amend the formula for the California
Public Employees' Retirement System (CaIPERS) to 3% @ 55 Full formula for local police
members only. The Resolution of Intent and the Ordinance amending the CaIPERS
contract are actions that must be certified by City Council to comply with CaIPERS contract
amendment procedures.
Pursuant to Government Code Section 7507, attached is the contract amendment cost
analysis prepared by CaIPERS, reflecting an additional 2.963% to the employer contribution
rate, with an estimated total employer rate of 8.608% for local police members only. Based
on this rate increase, the estimated increased cost will be$182,079 per year.
STS—WE MI
LS ,
Director of Human Resou es
APPROVED ��/'
City Manager
REVIEWED BY DEn OF FINANCE
ATTACHMENTS: CaIPERS Contract Amendment Cost Analysis (rzV
Resolution of Intention to Approve an Amendment to Contract
Ordinance Authorizing an Amendment to the Contract
111A
CONTRACT AMENDMENT COST ANALYSIS-VALUATION BASIS:JUNE 30, I999
SAFETY POLICE PLAN FOR CITY OF PALM SPRINGS
EMPLOYER NUMBER 355
Benefit Description: Section 21363.1,3% @ 55 Full Formula for Local Police Members Only
The table below shows the change in the total present value of benefits for the proposed plan amendment.
The present value of benefits represents the total dollars needed today to fund all future benefits for
current members of the plan, i.e. without regard to future employees. The difference between this amount
and current plan assets must be paid by future employee and employer contributions. As such,the change
in the present value of benefits due to the plan amendment represents the"cost" of the plan amendment.
However, for plans with excess assets some or all of this "cost" may already be covered by current excess
assets.
The Ca1PERS Board adopted a resolution, affecting cost estimates delivered after Feb 21, 2001, that
provides a one-time increase in the actuarial value of assets to 95% of market value for the calculation of
the employer rate when a rate plan adopts a contract amendment that increases the present value of
benefits of active employee members by not less than 50 % of the increase in actuarial value of assets.
This resolution applies only to plans that(I)file a resolution of intention to amend their plan with
CaIPERS before June 30, 2001 and that(2)amend their contract with an effective date on or before June
30, 2002. If a plan amends more than once during the window period, only the first qualifying amendment
will result in the asset increase to 95% of market value. Therefore, if your plan previously adopted an
amendment which increased the actuarial value of assets to 95% of market value, no increase in assets
will be shown in the tables below. If your plan's actuarial value of assets was not previously increased to
95% of market value, the tables below show the effect on its assets due to this one-time change in
actuarial method (i.e., the 95% market value of assets).
Change Due to Post-Amendment
Pre-Amendment Plan Amendment Post Method
& Method Change Change
Total Present Value of Benefits $ 59,238,850 $ 2,839,186 $ 62,078,036
Actuarial Value of Plan Assets 52,771,807 2,457,410 55,229,217
Present Value of Future Employer
and Employee Contributions $ 6,467,043 $ 381,776 $ 6,848.819
It is not required, nor necessarily desirable, to have accumulated assets sufficient to cover the total present
value of benefits until every member has left employment. Instead, the actuarial funding process
calculates a regular contribution schedule of employee contributions and employer contributions (called
normal costs)which are designed to accumulate with interest to equal the total present value of benefits
by the time every member has left employment. As of each June 30, the actuary calculates the
"desirable" level of plan assets as of that point in time by subtracting the present value of scheduled future
employee contributions and future employer normal costs from the total present value of benefits. The
resulting"desirable" level of assets is called the accrued liability.
A plan with assets exactly equal to the plan's accrued liability is simply"on schedule" in funding that
plan, and only future employee contributions and future employer normal costs are needed. A plan with
assets below the accrued liability is"behind schedule", or is said to have an unfunded liability, and must
temporarily increase contributions to get back on schedule. A plan with assets in excess of the plan's
accrued liability is "ahead of schedule", or is said to have excess assets, and can temporarily reduce future
contributions. A plan with assets in excess of the total present value of benefits is called super-funded,
and neither future employer nor employee contributions are required. Of course, events such as plan
amendments and investment or demographic gains or losses can change a plan's condition from year to
March 23, 2001 Page ] of 3
10:12AM J9Az
CONTRACT AMENDMENT COST ANALYSIS-VALUATION BASIS: JUNE 30, 1999
SAFETY POLICE PLAN FOR CITY OF PALM SPRINGS
EMPLOYER NUMBER 355
Benefit Description: Section 21363.1,3% @ 55 Full Formula for Local Police Members Only
year. For example, a plan amendment could cause a plan to move all the way from being super-funded to
being in an unfunded position.
The changes in your plan's accrued liability, unfunded accrued liability, and the funded ratio as.of June
30, 1999 due to the plan amendment are shown in the table below.
Change Due to Post-Amendment
Pre-Amendment Plan Amendment Post Method Change
& Method Change
Accrued Liability $ 49,321,115 $ 2,710,848 $ 52,031,963
Assets 52,771,807 2,457,410 55,229,217
Unfunded Liability $ (3,450,692) $ 253,438 $ (3,197,254)
Funded Ratio 107.0% 106.1%
While the tables above give the changes in the "cost"and funded status of the plan due to the amendment,
there remains the question of what will happen to the employer contribution rate because of the change in
plan provisions.
CaIPERS policy is to implement rate changes due to plan amendments immediately on the effective date
of the change in plan benefits. In general, the policy also provides that the change in unfunded liability
due to the plan amendment will be separately amortized over a period of 20 years from the effective date
of the amendment and all other components of the plan's unfunded liability/excess assets will continue to
be amortized separately.
However, special rules have to be applied to plans with a current employer contribution rate of zero. The
pre-amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or
more years into the future. A plan amendment will use up some or all of the pre-amendment excess
assets. If there is still excess assets (i.e..if the plan is still ahead of schedule) after the plan amendment,
the remaining excess assets were spread over the greater of 5 years or the number of years for which the
excess assets would keep the employer rate equal to zero. If the amendment uses up all excess assets and
creates an unfunded liability (i.e. from being ahead of schedule to behind schedule), the post-amendment
unfunded liability was amortized over 20 years.
The table below shows the immediate short-term change in your plan's employer contribution rate due to
the plan amendment.
Rate Change Due to Post-Amendment
Component Pre-Amendment Plan Amendment Post Method Change
& Method Change
Normal Cost 13.414% 2.209% 15.623%
Unfunded/Excess Asset Cost (7.769)% 0.754% (7.015)%
1959 Survivor 0.000% 0.000% 0.000%
Total Employer Rate 5.645% 2.9630/. 8.608%
Amortization Period Multiple Years 20 Years Multiple Years
March 23, 2001 Page 2 of 3
10:12 AM
l9'�9 3
CONTRACT AMENDMENT COST ANALYSIS-VALUATION BASIS:JUNE 30, 1999
SAFETY POLICE PLAN FOR CITY OF PALM SPRINGS
EMPLOYER NUMBER 355
Benefit Description: Section 21363.1,3% @ 55 Full Formula for Local Police Members Only
Note that the change in normal cost in the table above may be much more indicative of the long term
change in the employer contribution rate due to the plan amendment. The plan's unfunded
liability/excess asset cost shown in the table above is a temporary adjustment to the employer contribution
to"get the plan back on schedule". This temporary adjustment to the employer rate varies in duration
from plan to plan. For example, a plan with initial excess assets being amortized over a short period of
time will typically experience a large rate increase when excess assets are fully amortized. While a plan
amendment for such a plan may produce little or no increase in the employer contribution rate now, the
change in normal cost due to the plan amendment will become fully reflected in the employer
contribution rate as soots as initial excess assets are fully amortized.
If your agency is requesting cost information for two or more benefit changes, the cost of adopting more
than one of these changes may not be obtained by adding the individual costs. Instead, a separate
valuation should be done to provide a cost analysis for the combination of benefit changes. If the
proposed plan amendment applies to only some of the employees in the plan, the rate change due to the
plan amendment still applies to the entire plan, and is still based on the total plan payroll.
Please note that the cost analysis provided in this document may not be relied upon once the CalPERS
actuarial staff have completed the next annual valuation,that is, the annual valuation as of June 30, 2000.
If you have not taken action to amend your contract, and we have already mailed the June 30, 2000
annual valuation report,you must contact our office for an updated cost analysis, based on the new annual
valuation.
This actuarial valuation for this proposed plan amendment is based on the participant, benefits, and asset
data used in the June 30, 1999 annual valuation, with the benefits modified if necessary to reflect what is
currently provided under your contract with CalPERS, and further modified to reflect the proposed plan
amendment. Descriptions of the actuarial methodologies, actuarial assumptions, and plan benefit
provisions may be found in the appendices of the June 30, 1999 annual report. Please note that the results
shown here are subject to change if any of the data or plan provisions changes from what was used in this
study. It is our opinion that the valuation has been performed in accordance with generally accepted
actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board,
and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed
by the CalPERS Board of Administration according to provisions set forth in the California Public
Employees' Retirement Law.
David Du Bois, F.S.A.
Associate Pension Actuary, CalPERS
Fin Process Ids: Annual-49654 Base-56986 Proposal-56987
March 23,2001
I0:I2 AM Page 3 of 3
/#4 0/
Ca1PERS
EXHIBIT
California
Public Employees' Retirement System
AMENDMENT TO CONTRACT
Between the
Board of Administration
n
California Public Employees' Retirement Systems
and the
City Connmrnll
City ®f Palm Springs
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 5, 1957, and witnessed December 3, 1956, and as amended effective July 14,
1965, January 14, 1973, January 1, 1975, September 5, 1976, July 10, 1977, October
15, 1978, April 29, 1979, February 27, 1983, July 1, 1984, June 29, 1986, April 18,
1998, August 23, 1998 and April 18, 1999 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 April 18, 1999, and hereby replaced by the following paragraphs
numbered 1 through 13 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 and age 50 for local fire
members and age 55 for local police members.
PLEASE DO NOT SIGN "EXHIBIT ONLY"
2. Public Agency shall participate in the Public Employees' Retirement
System from and after January 5, 1957 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 ADDITIONAL EXCLUSIONS
5. The percentage of final compensation to be provided for each year of
credited prior and current service for local miscellaneous members shall
be determined in accordance with Section 21354 of said Retirement Law,
subject to the reduction provided therein for service prior to December 31,
1974, termination of Social Security, for members whose service has been
included in Federal Social Security (2% at age 55 Full and Modified).
6. The percentage of final compensation to be provided for each year of
credited prior and current service as a local fire member shall be
determined in accordance with Section 21362 of said Retirement Law (2%
at age 50 Full).
7. The percentage of final compensation to be provided for each year of
credited prior and current service as a local police member shall be
determined in accordance with Section 21363.1 of said Retirement Law
(3% at age 55 Full). The required member contribution rate is 9% of
reportable compensation.
PLEASE DO NOT SIGN "EXHIBIT ONLY„
8. 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 21024 (Military Service Credit as Public Service), Statutes
of 1974.
C. Section 20042 (One-Year Final Compensation).
d. Section 20965 (Credit for Unused Sick Leave).
e. Section 21574 (Fourth Level of 1959 Survivor Benefits).
9. Public Agency, in accordance with Government Code Section 20790,
ceased to be an "employer" for purposes of Section 20834 effective on
September 5, 1976. 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.
10. 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.
11. 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 21574 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.
12. 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.
13. 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 CITY OF PALM SPRINGS
�v
Q
BY &r' ETIREMENT
BYi
KENNETH W. MARZIEF PRESIDING OFFICER
ACTUARIAL & EMPLERVICES DIVISION
PUBLIC EMPLOYEE SYSTEM
AC'J Witness Date
Attest:
� Clerk Qy
AMENDMENT
PERS-CON-702A(Rev 8\96)
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Division
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
(916) 326-3420
CERTIFICATION OF GOVERNING BODY'S ACTION
I hereby certify that the foregoing is a true and correct copy of a Resolution adopted by the
of the
(governing body)
(public agency)
on
(date)
Clerk/Secretary
Title
PERS-CON-12(rev 1/96)
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Division
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
(916) 326-3420
CERTIFICATION OF COMPLIANCE WITH
GOVERNMENT CODE SECTION 7507
1 hereby certify that in accordance with Section 7507 of the Government Code
the future annual costs as determined by the System Actuary and/or the increase
in retirement benefit(s) have been made public at a public meeting of the
of the
(governing body)
(public agency)
on which is at least two weeks prior to the adoption of the
(date)
Resolution / Ordinance.
Clerk/Secretary
Title
Date
PERS-CON-12A(rev. 1/96)
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Division
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
(916) 326-3420
CERTIFICATION OF MEMBER CONTRIBUTION RATE
I hereby certify that the City of Palm Springs and its police employees understand and
agree that the required member contribution rate for members subject to Section
21363.1 (3% @ 55 Full formula) is 9% of reportable compensation.
Signature of Governing Body Presiding Officer
Title
Witness
Date
3% @50/ 3% @55
Full/Supplemental formula
RESOLUTION NO.
OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA,
DECLARING ITS INTENTION TO
APPROVE AN AMENDMENT TO
CONTRACT BETWEEN THE BOARD OF
ADMINISTRATION OF THE CALIFORNIA
PUBLIC EMPLOYEES' RETIREMENT
SYSTEM AND THE CITY COUNCIL OF
THE CITY OF PALM SPRINGS.
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 21363.1 (3% @ 55 Full formula)for local police
members only.
NOW, THEREFORE, BE IT RESOLVED that the governing body of the above agency
does hereby give notice of its intention to approve an amendment to the contract between
said public agency 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, as on file in the office of the City Clerk.
ADOPTED this 161h day of May 2001.
AYES:
NOES:
ABSENT:
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By
CITY CLERK CITY MANAGER
REVIEWED &APPROVED:
ORDINANCE NO.
AN ORDINANCE OF THE CITY OF PALM
SPRINGS, CALIFORNIA, AUTHORIZING
AN AMENDMENT TO CONTRACT
BETWEEN THE BOARD OF
ADMINISTRATION OF THE CALIFORNIA
PUBLIC EMPLOYEES' RETIREMENT
SYSTEM AND THE CITY COUNCIL OF
THE CITY OF PALM SPRINGS.
THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, DOES ORDAIN
AS FOLLOWS:
SECTION 1. That an amendment to the contract between the City Council of the City of
Palm Springs and the Board of Administration of the California Public Employees'
Retirement System is hereby authorized, a copy of said amendment being attached
hereto, marked Exhibit, and by such reference made a part hereof as though herein set out
in full, as on file in the office of the City Clerk.
SECTION 2. The Mayor of the City of Palm Springs is hereby authorized, empowered,
and directed to execute said amendment for and on behalf of said Agency.
SECTION 3. This Ordinance shall be in full force and effect thirty (30) days after passage.
SECTION 4. The City Clerk is hereby ordered and directed to certify to the passage of this
Ordinance, and to cause the same or a summary thereof or a display advertisement, duly
prepared according to the law, to be published in accordance with law.
ADOPTED this day of 2001.
AYES:
NOES:
ABSENT:
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By
CITY CLERK MAYOR
REVIEWED &APPROVED:
� 0, -Now