08.d. Two Years Additional Service CreditMEMORANDUM
TO: CITY COUNCIL
FROM: ANGELA KRAETSCH, DIRECTOR OF ADMINISTRATIVE SERVICE
BY: KAREN SISKO, HUMAN RESOURCES MANAGER yy
SUBJECT: CONSIDERA'I'ION OF A RESOLU'TION TO GRANT ANOTHER
DESIGNATED PERIOD FOR TWO YEARS ADDITIONAL SERVICE
CREDIT WITH THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT
SYSTEM (PERS) FOR THE CLASSIFICATION OF MAINTENANCE
SERVICES SUPERVISOR
DATE: MAY 8,2012
RECOMMENDATION:
It is recommended the City Council: 1) Approve and authorize the Mayor to sign on
behalf of the City the attached Resolution to grant another designated period for Two
Years Additional Service Credit with the California Public Employees' Retirement
System for the classification of Maintenance Services Supervisor; and 2) Authorize the
Mayor to sign the Certification of Compliance With Government Code Section 20903.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The cost of providing Section 20903, Two Years Additional Service Credit, is based on
the eligible employees that select this benefit. In compliance with Section 7507,
CalPERS requires that the City must certify that it made public at a duly noticed public
meeting the costs associated with offering another designated period for the Two Years
Additional Service Credit at least two weeks prior to the adoption of the Resolution.
These costs were presented at the April 24, 2012 Council meeting. CalPERS utilizes
the member's annual reportable compensation, a cost factor based on the member's
age, and a factor based on whether the City provides a Survivor Allowance to estimate
the cost. This cost is passed on to the City through an increase in the CalPERS
employer contribution rate. This new rate would go effective July 1, 2014. The costs
are amortized over a twenty year period.
If all three eligible Maintenance Services Supervisors select this benefit, the annual cost
is approximately $10,303 for twenty years for a final cost of roughly $206,060. The
annual salary and benefit savings for these three positions is $332,090 per year.
Two of the three eligible Maintenance Services Supervisors have indicated that they will
take this benefit and retire. 'The annual cost for these two employees is
$6,880 for twenty years for a final cost of $137,600. The annual salary and benefit
Agenda Item 8.d.
Page 1
CITY COUNCIL
CONSIDERATION OF A RESOLUTION TO GRANT ANOTHER DESIGNATED
PERIOD FOR TWO YEARS ADDITIONAL SERVICE CREDIT WITH THE
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) FOR THE
CLASSIFICATION OF MAINTENANCE SERVICES SUPERVISOR
MAY 8,2012
PAGE 2
savings for these two positions is $221,070. The anticipated net annual savings of the
restructuring is roughly $90,000. Cost efficiencies are identified as a priority in the
Critical Needs Action Plan.
BACKGROUND:
The City contracts with the California Public Employees' Retirement System (CalPERS)
to provide retirement benefits to employees. The retiree benefits are based on the
number of years of service, the employee earnings, and the benefit provision of the
contract.
In 2009, the City amended the contract with CalPERS to provide an additional optional
retirement benefit to employees. Under Government Code Section 20903, an agency
can offer two years additional service credit (commonly referred to as the "Golden
Handshake") to members who retire during a designated period because of impending
mandatory layoffs, demotions or transfers that constitute at least one percent of the unit
that will remain permanently unfilled.
ANALYSIS OF ISSUES:
At the April 24, 2012 Council meeting, the City Council approved the reorganization of
the Recreation and Maintenance Services Department. As part of the approved
reorganization to avoid potential lay-offs, the incentive of Two Years Additional Service
Retirement was considered for the Maintenance Services Supervisor classification. In
order for an employee to be eligible to take advantage of this benefit, they must be in a
position designated as eligible for this benefit, be at least fifty (50) years of age, have
five (5) years of service credit with CalPERS, and retire within a specified period of time
designated by the City. This window of time during which participating employees must
retire has to be a minimum of ninety days and a maximum of 180 days effective after
the date of the resolution. The designated retirement period shall be May 9, 2012
through August 8, 2012.
Pursuant to Government Code Section 20903, the Two Years Additional Service Credit
would be made available for eligible employees in the classification listed below:
Maintenance Services Supervisor
This benefit is only recommended in operations where staff believes vacancies can be
maintained without impacting service levels.
In order to grant another designated period for the Two Years Additional Service Credit,
the City must adopt a resolution as prepared by CalPERS and have the Mayor sign the
Certification of Compliance with Government Code Section 20903.
ADVANTAGES:
By offering this benefit, two employees have indicated they will voluntarily retire, thereby
reducing potential layoffs required by the City in order to balance the budget and assist
with the reorganization efforts. One year of salary and benefit savings for the two
Agenda Item 8.d.
Page 2
CITY COUNCIL
CONSIDERATION OF A RESOLUTION TO GRANT ANOTHER DESIGNATED
PERIOD FOR TWO YEARS ADDITIONAL SERVICE CREDIT WITH THE
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) FOR THE
CLASSIFICATION OF MAINTENANCE SERVICES SUPERVISOR
MAY 8,2012
PAGE 3
employees who indicated they would retire will more than pay for the full cost of offering
this benefit.
DISADVANTAGES:
The cost of this benefit is amortized over twenty (20) years so the cost of offering this
benefit will be delayed into future years. The cost provided in this report is an
approximate cost. CalPERS does not provide the actual cost of the benefit until they
provide the annual valuation report for the fiscal year that begins two years after the end
of the designated period. 'The City must also certify that any vacancies created by a
retirement under this section or in any position in the Miscellaneous organizational unit
remain permanently unl'illed, thereby resulting in an overall reduction in the work force
of such organizational unit. Therefore, use of this benefit reduces future flexibility to
increase full-time staffing.
ALTERNATIVES:
The following alternatives are provided for the Council's consideration:
- Approve staffs recommendation by adopting the Resolution to grant another
designated period for Two Years Additional Service Credit; - Conduct layoffs in the Recreation and Maintenance Services Department and not
incur the costs associated with offering this benefit; - Do not approve staffs recommendations; - Provide direction to staff.
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, May 4, 2012. 'The Agenda
and report were posted on the City's website on Friday, May 5, 2012. No public
comments were received.
Attachments:
1. List of Job Classifications Eligible for Two Years Additional Service Credit,
Section 20903
Agenda Item 8.d.
Page 3
CITYCOUNCIL
OF THE
CITY OF ARROYO GRANDE
RESOLUTION
TO
GRANT ANOTHER DESIGNATED PERIOD
FOR
TWO YEARS ADDITIONAL SERVICE CREDIT
WHEREAS, the City Council of the City of Arroyo Grande is a contracting Public Agency
of the Public Employees' Retirement System; and
WHEREAS, said Public Agency desires to provide another designated period for Two
Years Additional Service Credit, Section 20903, based on the contract
amendment included in said contract which provided for Section 20903,
Two Years Additional Service Credit, for eligible members;
NOW, THEREFORE, BE IT RESOLVED, that said City Council does seek to add
another designated period, and does hereby authorize this Resolution,
indicating a desire to add a designated period from
ALJ 4, a013 through CL~UST 8, 2012 for
eligible MAI&S~)~MCE SQ.Y~(~S SuPev~Jad members in the
RLCREA~~ON A~JO M~~I~JTEF)ANC& SE4dlrfLS OC~ALT~ t dr .
Adopted and approved this day of l
ClTY COUNCIL
OF THE
ClTY OF ARROYO GRANDE
BY
Presiding Officer
Attest:
ClerkISecretary
(Rev. 1196) ,
Agenda Item 8.d.
Page 4
CERTIFICATION OF COMPLIANCE WITH
GOVERNMENT CODE SECTION 20903
In accordance with Government Code Section 20903 and the contract between the
Public Employees' Retirement System, the City of Arroyo Grande hereby certifies that:
1. Because of an impending curtailment of, or change in the manner of performing
service, the best interests of the agency will be served by granting such additional
service credit.
2. The added cost to the retirement fund for all eligible employees who retire during
the designated window period will be included in the contracting agency's
employer contribution rate for the fiscal year that begins two years after the end of
the designated period.
3. It has elected to become subject to Section 20903 because of impending
mandatory transfers, demotions, and layoffs that constitute at least 1 percent of
the job classification, department or organizational unit, as designated by the
governing body, resulting from the curtailment of, or change in the manner of
performing, its services.
4. Its intention at the time Section 20903 becomes operative is to keep all vacancies
created by retirements under this section or at least one vacancy in any position in
any department or other organizational unit permanently unfilled thereby resulting
in an overall reduction in the work force of such department or organizational unit.
Page 1 of 2 I I Ill I I Ilii~i)iuiiiI I It II I U Agenda Item 8.d.
Page 5
THEREFORE, the City of Arroyo Grande hereby elects to provide the benefits of
Government Code Section 20903 to all eligible members who retire within the
designated period, from to
Presiding Officer
Title
Date
Page 2 of 2 IS l l l C\iiiiiiiiii 1811 111 Ill Agenda Item 8.d.
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Attachment 1
CITY OF ARROYO GRANDE
LIST OF JOB CLASSIFICATIONS ELIGIBLE FOR TWO YEARS
ADDITIONAL SERVICE CREDIT, SECTION 20903
The following is the job classification in the Miscellaneous Group eligible for Two Years
Additional Service Credit, Section 20903 if eligible employees retire during the window
of May 9,2012 through August 8,2012:
Classification
Maintenance Services Supervisor
Department
Recreation and Maintenance Services
Agenda Item 8.d.
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Agenda Item 8.d.
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