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10.a. PERS ResolutionTO: MEMORANDUM FROM: ANGELA KRAETSCH, DIRECTOR OF ADMINISTRATIVE SERVICES~' BY: SUBJECT: CONSIDERATION OF A RESOLUTION TO GRANT A DESIGNATED PERIOD FOR TWO YEARS ADDI'TIONAL SERVICE CREDIT WITH THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) FOR THE CLASSIFICATION OF MAINTENANCE SERVICES LEAD PERSON AND MAINTENANCE SERVICES SUPERVISOR DATE: JUNE 12,2012 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 a designated period for Two Years Additional Service Credit with the California Public Employees' Retirement System for the classification of Maintenance Services Lead Person and 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. The Maintenance Services Supervisor costs were presented at the April 24, 2012 Council meeting and the Maintenance Services Lead Person costs were presented at the May 22, 2012 Council meeting. CalPERS utilizes the member's annual repdrtable 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 Agenda Item 10.a. Page 1 CITYCOUNCIL CONSIDERATION OF A RESOLUTION TO GRANT A DESIGNATED PERIOD FOR TWO YEARS ADDITIONAL SERVICE CREDIT WITH THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) FOR THE CLASSIFICATION OF MAINTENANCE SERVICES SUPERVISOR AND MAINTENANCE SERVICES LEAD PERSON JUNE 12,2012 PAGE 2 $6,880 for twenty years for a final cost of $137,600. The annual salary and benefit savings for these two positions is $221,070. If all three eligible Maintenance Services Lead Persons select this benefit, the annual cost is approximately $8,691 for twenty years for a final cost of roughly $173,820. The annual salary and benefit savings for these three positions is $286,948 per year. One of the three eligible Maintenance Services Lead Persons has indicated that he will take this benefit and retire. The annual cost for this employee is $2,759 for twenty years for a final cost of $55,180. The annual salary and benefit savings for this position is $95,086. 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 and Lead Person 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 June 13, 2012 through September 13, 2012. The City Council approved the designated retirement period for Maintenance Services Supervisors as part of the consent agenda at the May 8, 2012 meeting. However, staff was notified by CalPERs that the Resolution cannot be approved as a consent item. Therefore, it must be approved again and has now been combined with approval for the Lead Worker position. Agenda Item 10.a. Page 2 CITYCOUNCIL CONSIDERATION OF A RESOLUTION TO GRANT A DESIGNATED PERIOD FOR TWO YEARS ADDITIONAL SERVICE CREDIT WITH THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) FOR THE CLASSIFICATION OF MAINTENANCE SERVICES SUPERVISOR AND MAINTENANCE SERVICES LEAD PERSON JUNE 12,2012 PAGE 3 Pursuant to Government Code Section 20903, the Two Years Additional Service Credit would be made available for eligible employees in the classifications listed below: Maintenance Services Supervisor Maintenance Services Lead Person 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, three 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 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 unfilled, 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. Agenda Item 10.a. Page 3 CITY COUNCIL CONSIDERATION OF A RESOLUTION TO GRANT A DESIGNATED PERIOD FOR TWO YEARS ADDITIONAL SERVICE CREDIT WITH 'THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) FOR THE CLASSIFICATION OF MAINTENANCE SERVICES SUPERVISOR AND MAINTENANCE SERVICES LEAD PERSON JUNE 12,2012 PAGE 4 PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted in front of City Hall on Thursday, June 7, 2012. The Agenda and report were posted on the City's website on Friday, June 8, 2012. No public comments were received. Attachments: 1. List of Job Classifications Eligible for Two Years Additional Service Credit, Section 20903 Agenda Item 10.a. Page 4 CIN COUNCIL OF THE CIN 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 June 13, 2012 through September 13, 2012 for eligible Maintenance Svcs Supervisor members in the Recreation and Maintenance Services Department Adopted and approved this day of , ClTY COUNCIL OF THE ClTY OF ARROYO GRANDE BY Presiding Officer Attest: Clerk/Secretary (Rev. 1/36) Agenda Item 10.a. Page 5 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM Employer Services Division Contract Maintenance Unit P.O. Box 942709 Sacramento, CA 94229-2709 CERTIFICA~ION 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 Council of 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. THEREFORE, the City Council of 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, through ClTY COUNCIL OF 'THE ClTY OF ARROYO GRANDE BY Presiding Officer Attest: Date 2yr certification-PA (Rev. 4/04) Agenda Item 10.a. Page 6 CITY COUNCIL 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 June 13, 2012 through September 13, 2012 for eligible Maintenance Svcs Lead Person members in the Recreation and Maintenance Services Department Adopted and approved this day of , ClTY COUNCIL OF THE ClTY OF ARROYO GRANDE BY Presiding Officer Attest: ClerklSecretary (Rev. 1196) Agenda Item 10.a. Page 7 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM Employer Services Division Contract Maintenance Unit P.O. Box 942709 Sacramento, CA 94229-2709 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 Clty Council of 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. THEREFORE, the City Council of the Clty of Arroyo Grande hereby elects to provide the benefits of Government Code Section 20903 to all eligible members who retire within the designated period, through ClTY COUNCIL OF THE ClTY OF ARROYO GRANDE BY Presiding Officer Attest: Date 2yr certification-PA (Rev. 4/04) Agenda Item 10.a. Page 8 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 June 13,2012 through September 13,2012: Classification Maintenance Services Supervisor Maintenance Services Lead Person Department Recreation and Maintenance Services Recreation and Maintenance Services Agenda Item 10.a. Page 9 THIS PAGE INTENTIO NALLY LEFT BLANK Agenda Item 10.a. Page 10