Title
Adopt an Urgency Ordinance Authorizing an Amendment to the Contract Between the Board of Administration of the California Public Employees' Retirement System (PERS) and the City Council of the City of Alameda to Include Provisions Pursuant to Government Code 20516 for "Cost Sharing" for Local Police Members and for Local Fire Members. (Human Resources)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Adopt an Urgency Ordinance Authorizing an Amendment to the Contract Between the Board of Administration of the California Public Employees' Retirement System and the City Council of the City of Alameda to Include Provisions Pursuant to Government Code 20516 for "Cost Sharing" for Local Police Members and for Local Fire Members
BACKGROUND
At the City Council meeting on June 21, 2016, the City Council adopted Resolution 15160, a Resolution of Intention to approve an amendment to the contract between the Board of Administration of the California Public Employees’ Retirement System (CalPERS) and the City of Alameda to include provisions pursuant to Government Code 20516 "Cost Sharing" for local police members and for local fire members.
Classic employees (generally defined in the Pension Reform Act as an employee who was a CalPERS member prior to January 1, 2013), in the Police and Fire bargaining units agreed to pay, in addition to the 9% employee contribution toward retirement benefit, up to 6% in employee cost sharing. This additional cost sharing was again included in updated agreements between the bargaining units and the City in 2015. This additional cost share was also adopted in the Executive Management Compensation Plan for Chief of Police and Fire Chief. The Classic employees cost share was 2% in June 2013 and has increased 1% a year in July of 2013, 2014, and 2015 and will cap at 6%, based on the current agreements, in July 2016. Employees who were hired after the Pension Reform Act and do not have reciprocity are not impacted by this change. This group of employees has an initial contribution rate of 50% of the normal cost.
In 2012, the City amended the contract with California Public Employees Retirement System (CalPERS) for variable cost rate sharing of up to 5.057% under Government Code Section 20516(a), based on the City’s contract with CalPERS for the 3% @ 50 and One-Year Final Compensation optional benefits for local fire and local police employees. Government Code section 20516 permits employees to share a portion of their employer’s pension cost. In order for a member’s contribution to be credited to each member’s account and be refundable to members who separate from CalPERS and withdraw their contribution, the contract with PERS must reflect this as well as the cost share contribution amount.
Since our current PERS contract only permits Cost Sharing of up to 5.057%, the City’s contract with PERS must be amended to allow for the employees additional 1% contribution to be credited to the employees retirement account as is the current 5% employee cost share. On April 25, 2016, City staff submitted to CalPERS a request for a contract amendment for local police and local fire employees to establish a fixed cost share amount of 6% in order to comply with the respective MOUs. On May 31, 2016, CalPERS issued the amendment documents and instructions.
DISCUSSION
CalPERS requires that clearly defined procedures be followed for contract amendments. The following steps are being taken in order to complete the contract amendment process:
• The City Council adopted a Resolution of Intention (Resolution 15160) on June 21, 2016.
• A secret ballot election, pursuant to Government Code Section 20474, requiring that employees affected by a contract amendment vote to change the employees’ rate of contribution, was conducted between June 22, 2016 and July 6, 2016. The employees approved the contract amendment with the results of the election as follows:
Police Group:
Number of Eligible Employees: 70
Number of Ballots Cast: 48
Voter Participation: 69%
Number of Yes Votes: 48 (100% of total votes cast)
Number of No Votes: 0 (0% of total votes cast)
Fire Group:
Number of Eligible Employees: 82
Number of Ballots Cast: 64
Voter Participation: 78%
Number of Yes Votes: 64 (100% of total votes cast)
Number of No Votes: 0 (0% of total votes cast)
• The Ordinance, which will be an Urgency Ordinance, and a City Council vote on adoption, must occur no sooner than 20 days after the adoption of the Resolution of Intention. This Urgency Ordinance is being presented to the City Council tonight for adoption.
If this Urgency Ordinance is passed, the effective date of the CalPERS contract amendment will be the first day of a payroll period and will not be earlier than the day following the effective date of the Ordinance. The effective date for this Urgency Ordinance is July 19, 2016 so the effective date of the CalPERS contract amendment is anticipated to be July 24, 2016.
FINANCIAL IMPACT
This contract amendment merely reflects the city’s existing agreement with the safety unions. Approval of the amendment does not provide any additional benefit to the affected employees nor does it save to the City’s General Fund any additional amount because the proposed Fiscal Year 2016-17 Budget already assumes the additional 1% CalPERS savings (i.e. pick up by the safety employees.)
The value of the 1% contribution being made by public safety employees is estimated at $84,000 for Alameda Police Officers Association, $15,000 for Alameda Police Management Association, $108,000 for International Association of Fire Fighters and $11,000 for Alameda Fire Chiefs Association for Fiscal Year 2016-17.
ENVIRONMENTAL REVIEW
This action is exempt from the California Environmental Quality Act (CEQA) because it is not a project which has a potential for resulting in either a direct physical change in the environment, pursuant to Guideline section 15378.
RECOMMENDATION
Adopt an Urgency Ordinance authorizing an amendment to the contract between the board of administration of the California Public Employees' Retirement System and the City Council of the City of Alameda to include provisions pursuant to Government Code 20516 for "Cost Sharing" for local police members and for local fire members.
Respectfully submitted,
Nancy Bronstein, Human Resources Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Amendment to California Public Employees Retirement System Contract