CC 2017-03-14_09b EPMC Safety Fire Group MEMORANDUM
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 SAFETY FIRE GROUP
DATE: MARCH 14, 2017
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 local Safety Fire Group.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
Per the 2017/19 Memorandum of Understanding (MOU) between the International
Association of Fire Fighters Local 4403 and the Fives Cities Fire Joint Powers Authority
(FCFA), effective December 16, 2016 the EPMC decreased for Fire from 6% to 4%. Per
the compensation resolution for FCFA Management employees, the EPMC for the
Battalion Chief and Fire Chief positions decreased from 6% to 4%, effective January 13,
2017. These actions result in decreased costs to the FCFA, which benefits the City of
Arroyo Grande
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 for FY
2016-17 are allocated as follows: City of Arroyo Grande 48%, City of Grover Beach 33% and
OCSD 19%. 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
Item 9.b. - Page 1
CITY COUNCIL
ADOPTION OF A RESOLUTION IMPLEMENTING THE PAYING AND REPORTING OF
THE EPMC
MARCH 14, 2017
PAGE 2
deemed to be “classic” PERS members. For new employees subject to the Public
Employees Pension Reform Act (PEPRA), the member contribution is set by PERS and is
fully paid by the employee.
Prior to the adoption of PEPRA, payment of the employee share by employers, often in lieu
of providing salary raises to employees, was common. PEPRA no longer allows employers
to pay the employee contribution. 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 (IAFF) Local 4403 for the employees to pay 3% of
the 9% employee contribution. The Fire Chief and the Fire Battalion Chief positions 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.
In December 2016, FCFA completed negotiations with IAFF Local 4403 for a successor
agreement, which increases the employees paying the employee share of PERS
contributions over a three year period, eventually eliminating EPMC. In January 2017, the
management compensation resolution was amended to reflect similar changes, however the
management resolution encompasses only one calendar year and will reduce, but not fully
eliminate EPMC.
ANALYSIS OF ISSUES:
Employees benefit 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.
Based on the recently negotiated successor agreement, effective December 16, 2016,
members of the IAFF Local 4403 will begin paying 5% of the 9% employee contribution. In
July 2017 they will begin paying 7% of the 9% employee contribution and in July 2018 they
will begin paying the full 9% employee contribution. The Fire Chief and the Fire Battalion
Chiefs will pay 5% of the employee contribution rate in January 2017 and 7% of the 9% in
July 2017. The remaining 2% is anticipated to be included in the management compensation
resolution that will be adopted for calendar year 2018, thus eliminating EPMC at that time.
Item 9.b. - Page 2
CITY COUNCIL
ADOPTION OF A RESOLUTION IMPLEMENTING THE PAYING AND REPORTING OF
THE EPMC
MARCH 14, 2017
PAGE 3
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:
1. Adopt a Resolution to implement the reporting of the EPMC for the members of the
Fire Safety group;
2. Do not adopt the Resolution;
3. Provide direction to staff.
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.
ENVIROMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Item 9.b. - 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 members of the local Safety Fire Group.
• This benefit shall consist of paying 4% 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, effective January 13, 2017.
• This benefit shall consist of paying 2% 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, effective July 14, 2017.
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 14th day of March, 2017.
Item 9.b. - Page 4
RESOLUTION NO.
PAGE 2
JIM HILL, MAYOR
ATTEST:
__
KELLY WETMORE, CITY CLERK
APPROVED AS TO CONTENT:
_____
ROBERT MCFALL, INTERIM CITY MANAGER
APPROVED AS TO FORM:
HEATHER WHITHAM, CITY ATTORNEY
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