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CC 2014-08-26_08.c. EPMC to CalPERS for Fire MgmtMEMORANDUM TO: CITY COUNCIL FROM: DEBBIE MALICOAT, DIRECTOR OF ADMINISTRATIVE SERVICES~ SUBJECT: CONSIDERATION OF A RESOLUTION TO IMPLEMENT PAYING AND REPORTING OF EMPLOYER PAID MEMBER CONTRIBUTIONS (EPMC) TO THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) FOR THE MANAGEMENT EMPLOYEES OF THE SAFETY FIRE GROUP DATE: AUGUST 26, 2014 RECOMMENDATION: It is recommended the City Council adopt the attached resolution to implement the paying and reporting of the Employer Paid Member Contributions (EPMC) to the California Public Employees' Retirement System (PERS) for the Management employees of the Safety Fire Group. FINANCIAL IMPACT: Per the compensation resolution for Five Cities Fire Joint Powers Authority (FCFA), effective August 15, 2014 the EPMC decreased for the Fire Chief and Fire Battalion Chief from 9% to 6%. This will reduce the cost to the FCFA by approximately $8,800, of which the City of Arroyo Grande is responsible for 45% or $3,960. BACKGROUND: The Five Cities Fire Authority was established in July of 2010. It is comprised of the City of Arroyo Grande, the City of Grover Beach and the Oceano Community Services District (OCSD). Each agency pays a percentage of costs based on their population, service calls, assessed value, and number of stations and staffing. Based on that formula, the costs are allocated as follows: City of Arroyo Grande 45%, City of Grover Beach 35% and OCSD 20%. While the FCFA is a standalone agency, the employees are listed as City of Arroyo Grande employees for PERS purposes. Therefore, the City Council has to approve all resolutions related to a change in PERS benefits for the Fire Group. PERS separates employees into three different groups, Safety Fire, Safety Police and Miscellaneous. All sworn fire employees are included in the PERS Safety Fire Group, whether represented by a union or not. PERS benefits are financed through an employer contribution and an employee contribution. The employer contribution percentage varies from year to year, based on an annual actuarial calculation of accumulated reserves and future payments. The employee portion remains constant at 9% for fire personnel that are deemed to be "classic" PERS members. For new employees subject to the Public Item 8.c. - Page 1 CITY COUNCIL ADOPTION OF A RESOLUTION IMPLEMENTING THE PAYING AND REPORTING OF THE EPMC AUGUST 26, 2014 PAGE2 Employees Pension Reform Act (PEPRA), the member contribution is set by PERS and is fully paid by the employee. For PERS purposes, payments made for the employees are called Employer Paid Member Contributions (EPMC). In July 1994, under Government Code Section 20636(c), employers were given the option of reporting the EPMC as additional compensation. This means that the PERS contribution paid by the employer, for the employee, is reported as income for purposes of calculating retirement benefits. Prior to 2012, the FCFA was paying the full 9% employee contribution on behalf of all FCFA safety employees. In 2012, FCFA negotiated with the employees represented by the International Association of Fire Fighters Local 4403 for the employees to pay 3% of the 9% employee contribution. The Fire Chief and the Fire Battalion Chief are unrepresented Management members of the PERS Safety Fire Group and this change to EPMC did not affect them. However, at their June 27, 2014 meeting, the FCFA Board of Directors approved changes to the Fire Chief and Fire Battalion Chief compensation and benefits that included a provision for these positions to pay 3% of the 9% employee contribution, consistent with the represented employees. ANALYSIS OF ISSUES: Employees benefit monetarily when an employer pays EPMC. The EPMC is reported as additional earnings for purposes of calculating retirement benefits. The EPMC earnings are not subject to state and federal income taxes, nor social security and Medicare deductions. However, PERS (both employee and employer portions) must be paid on the additional reported earnings. Effective August 15, 2014, the Fire Chief and the Fire Battalion Chief will pay 3% of the employee contribution rate with the FCFA paying the remaining 6%. PERS requires the City Council to adopt the resolution to pay and report the value of EPMC before the reporting change can be instituted. However, the City delegated personnel and compensation decisions related to the Fire personnel to the FCFA Board of Directors when it was formed. Therefore, this action simply implements the provisions of the joint powers agreement. ALTERNATIVES: The following alternatives are provided for City Council consideration: -Adopt a Resolution to implement the reporting of the EPMC for the Management members of the Fire Safety group; -Do not adopt the Resolution; -Provide direction to staff. Item 8.c. - Page 2 CITY COUNCIL ADOPTION OF A RESOLUTION IMPLEMENTING THE PAYING AND REPORTING OF THE EPMC AUGUST 26, 2014 PAGE3 ADVANTAGES: Approving the recommended implementation of the reporting of the EPMC will reduce costs to the City and will be honoring the direction of the FCFA Board. DISADVANTAGES: There is no disadvantage identified in relation to this recommendation. ENVIRONMENTAL REVIEW: No environmental review is required for this item. PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted in front of City Hall on Thursday, August 21, 2014. The Agenda and report were posted on the City's website on Friday, August 22, 2014. No public comments were received. Item 8.c. - Page 3 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE TO IMPLEMENT THE PAYING AND REPORTING THE VALUE OF THE EMPLOYER PAID MEMBER CONTRIBUTIONS TO THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) WHEREAS, the City Council of the City of Arroyo Grande has the authority to implement Government Code Section 20636 (c) (4) pursuant to Section 20691; WHEREAS, the City Council of the City of Arroyo Grande has a written labor policy or agreement which specifically provides for the normal member contributions to be paid by the employer, and reported as additional compensation; WHEREAS, one of the steps in the procedures to implement Section 20691 is the adoption by the City Council of the City of Arroyo Grande of a Resolution to commence paying and reporting the value of said Employer Paid Member Contributions (EPMC); WHEREAS, the City Council of the City of Arroyo Grande has identified the following conditions for the purpose of its election to pay EPMC: • This benefit shall apply to all Management members of the local Safety Fire Group. • This benefit shall consist of paying 6% of the normal member contributions as EPMC, and reporting the same percent (value) of compensation earnable (excluding Government Code Section 20636(c) (4)) as additional compensation. • The effective date of this Resolution shall be August 15, 2014. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Arroyo Grande elects to pay and report the value of EPMC, as set forth above. On motion by Council Member , seconded by Council Member and on the following roll call vote, to wit: AYES: NOES: ABSENT: The foregoing Resolution was passed and adopted this __ day of __ _ 2014. Item 8.c. - Page 4 RESOLUTION NO. PAGE2 TONY FERRARA, MAYOR ATTEST: KELLY WETMORE, CITY CLERK APPROVED AS TO CONTENT: STEVEN ADAMS, CITY MANAGER APPROVED AS TO FORM: TIMOTHY J. CARMEL, CITY ATTORNEY Item 8.c. - Page 5 THIS PAGE INTENTIONALLY LEFT BLANK Item 8.c. - Page 6