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HomeMy WebLinkAboutAgenda Report - October 7, 1992 (69)Fa OR 4� CITY OF LODI COUNCIL COMMUNICATION c�tr ate' AGENDA T=: Introduction of Matters Pertaining to Public Employees' Retirement System Service Credit, �REETING DATE: October 7, 1992 I PREPARED BY: Joanne Narloch, Personnel Director (RECOMMENDED ACTION: Discuss Optional Provisions available through the Public Employees' Retirement System (PERS). BACKGROUND INFORMATION: The condition of the economy in the state has compelled many agencies to search for ways to cope with lost revenues. To assist agencies with implementing various courses of action, PERS has provided some relief through the offering of optional provisions for contracting agencies. The attached memorandum explains what the three options are and the conditions that apply to each. FUNDING: None. oanne M. Narlc :h Personnel Director JMN:Ira CC9218jTXTA.04P APPROVED.v'- THOMAS A. PETERSON City Mnnager CC•t TO: FROM: DATE RE: MEMORANDUM Tom Peterson, City Manager Joanne Narloch, Personnel Director September 25, 1992 PERS Options Per your direction, I have researched and prepared an analysis of our available options under PERS for the implementation of cutbacks. These options and their impact are discussed below. This option is currently available to PERS contracting agencies and provides two years of additional service credit to members who retire during a designated period if a mandatory transfer, layoff, or demotion is imminent and the following requirements are met: a. The designated period can not be less than 90 nor more than 180 days in length. b. The contracting agency must submit to PERS 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 within 30 days of billing; or on a two-year payment schedule subject to interest assewiient at the current employer crediting rate (8.75%) c. The contracting agency must certify that it is electing to be subject to the provisions of this section due to mandatory transfers, layoffs, and/or demotions and that these actions ccnstitute at least one_oercent of the job classification, department, or organizational unit; d. The contracting agency must certify that it is its intention at the time it becams subject to Section 20818 to keep all vacancies, 4r at least one vacancy in a"v nosition in any department or orQanizational unit. crested by retirements under this certinn permanently unfilled. The eligibility for this service credit is the mine as for a regular service retirement, which is at least (5) five years of service credit and SO years of age. The expiration date on this section was recently ammended from January, 1993 to January, '1998 by Senate Bill 1285. The estimated cost of providing this option is based on the employee's annual reportable compensation, the cost estimate factors and any additional allowances an agency may have. For the City cf Lodi, this amount would be 31% - 52% of annual salary for miscellaneous employees and 49% - 60% for safety employees. In general terms, this is about 50% of an employee's annual salary. The cost savings factor comes into play with the follow -upon filling or not filling the resulting vacancy. For example, if a vacancy was nut filled, the agency would save the cost of salary, and benefits. If a position was not filled for six months. the savings would be six m=^nths salary, benefits, and additional PERS contributions. If a position was filled immediately at a lower rate of pay, we may be saving salary, but we would be in esscnse paying PERS Fcr two employees. In addition, there is a $10.00 valuation fee for each member who retires during the designated period and receives the additional servioecredit. To provide this option, we would have to amend our contract with PERS, in compliance with the Government Code. Senate Bill 1285 was recently signed into law by the Governor. This bill added Section 20499.5 to the Government Code effective July I, 1992. This law gives contracting agencies the opportunity to preserve retirement benefits for employees who are affected by a re:!uction in salary or reduced working hours. In a nutshell, this law enables agencies to maintain compensation and service credit levels at the level currently provided to the employee prior to the reduction in salary and or working hours. There would be no additional cost tD the employer in offering this benefit. It would mean. however, that we would continue to make the employer and employee contributions on the basis of the employee's usual earnings prior to the reduction in salary and/or working hours. The net savings to us would be in reduced salary only. To provide this option, we would have to file resolution with PERS to inform the system of our intention. 2 Assembly Bill 75 This bili is currently on the governor's desk for signature. it would provide up to (4) tour years of additional service credit to local contracting agencies. The provision would only be available until December 31, 1993 . The following niles apply: The option would have to he available to all members of a membership category (i.e. police, fire. miscellaneous) and the contracting agency would have to certify that the retirements "will result in a net savings to the contracting agency." This option provides tip to four years of additional service credit to members who retire d u rin g a designated period because the best interests of the agency would be served by encouraging the retirements of local members and the following requirements are met: a. The designated period is no more than 320 days in length; b. The contracting agency must submit to PERS the actuirial equivalent of the difference het ween the allowance the inember will receive and the allowance the member would have received without the additional service credit; c. The transfer to the retirement fund shall be made in a manner and time period acceptable to the contracting agency and the board. T he estimated cost of providing this option would he double the cost of the two year option. or between 62% - 100% of the employee's annual salary, 'Phis amount could also he made on a payment schedule spread out up to two years. If a pay went schedule was selected. interest woutd be assessed at a rate of 8.75 %, By the first of Octobervc will know if the Governor has signed Assembly Rill 75 into law. if he has, we will be able to choose this option or Section 20818 (two-year service credit) "long with or in addition to Section 20499.5 (preservation of retirement benefits). There are some advantages to each of the respective service credit options and a determination would have to be made as to which would benefit us most.