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City Council Discussion
May 23, 2011
City of PasadenaPension Reform
Human Resources Department
2
Retirement Systems
• Timeline of Employer CalPERS Rates
• Projected CalPERS Cost
*FY11 & FY14 Rates are estimated from current payroll
FY09 FY10 FY11 FY12 FY13 FY14
MISCELLANEOUS PLAN 10.644% 10.855% 11.422% 15.484% 16.300% 19.000%
SAFETY PLAN 21.898% 22.977% 23.599% 26.559% 27.200% 30.200%
FY11 FY14
MISCELLANEOUS PLAN $12.3 M $13.2 M
SAFETY PLAN $9.6 M $10.3 M
Human Resources Department
3
Retirement Systems
• Currently the City participates in the CalPERS retirement plans> Miscellaneous Plan
2.5% @ 55
> Fire & Police Safety Plan 3% @ 55
• Both retirement plans are currently two tier
• Eligible part-time & temporary employees participate in separate plan of PARS Retirement
Human Resources Department
4
Miscellaneous
• Misc. Tier 1 Plan
> Employees hired on or before July 1, 1984
> 115 Active Employees
> 2.5% @ 55
> One (1) year final calculation
> 2% COLA
• Misc. Tier 2 Plan
> Employees hired on or after July 2, 1984
> 1333 Active Employees
> 2.5% @ 55
> Three (3) year final calculation
> 2% COLA
Human Resources Department
5
Fire
• Fire Tier 1 Plan
> Employees hired on or before April 29, 1984
> 21 Active Employees
> 3% @ 55
> One (1) year final calculation
> Post-Retirement Survivor
> 2% COLA
> FPRS System Transfer
• Fire Tier 2 Plan
> Employees hired on or after April 30, 1984
> 145 Active Employees
> 3% @ 55
> One (1) year final calculation
> Post-Retirement Survivor
> 2% COLA
Human Resources Department
6
Police
• Police Tier 1 Plan
> Employees hired on or before May 15, 1983
> 11 Active Employees
> 3% @ 55
> One (1) year final calculation
> Post-Retirement Survivor
> 2% COLA
> FPRS System Transfer
• Police Tier 2 Plan
> Employees hired on or after May 16, 1983
> 222 Active Employees
> 3% @ 55
> One (1) year final calculation
> Post-Retirement Survivor
> 2% COLA
Human Resources Department
7
PARS Retirement
• Part-time and Temporary Retirement Plan provided by PARS> Omnibus Budget Reconciliation Act of 1990
(OBRA 90) mandated employees of public agencies who are not members of the employer’s existing plan be covered under an alternative plan.
> 401(a) Type Plan
• 7.5% Shared Contribution> City contributes 4.0%
> Employee contributes 3.5%
8
Pension Alternatives
Human Resources Department
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Reform Options
• Add a third tier to the Retirement Plan> Miscellaneous Plans
2% @ 60 2% @ 55 2.5% @ 55 2.7% @ 55 3% @ 60
***(Only Plans offered by CalPERS)
•Reduce/Change Tier Options > i.e. Final Year Calculation, Military Buyback, Sick Leave
Credit, Pre-Retirement Optional Settlement Death Benefit, Post-Retirement Survivor Allowance, Death Benefit Continues, 59 Survivor Benefit Level 4, Prior Service Credit
> Safety Plans 2% @ 55 2% @ 50 2.5% @ 55 3% @ 55 3% @ 50
Human Resources Department
10
Reform Options
• Reduced plan with PARS Supplement• Reduce/Change Employee Contributions
paid by the City• Have employees pick up portion of City’s
PERS costs• Delay or Eliminate EPMC (PERS on PERS)• Revise all plans to 3 year final
compensation calculation• Restrict calculation of employees’
retirement benefit to base pay only; eliminate add-ons of specialty pays or leave banks
• Eliminate Retiree Medical Options
Human Resources Department
11
Reform Options
• Modify Employee Contributions > Current Contributions
RETIREMENT PLAN
GROUPEMPLOYEE
CONTRIBUTIONCITY
CONTRIBUTIONTOTAL
CONTRIBUTION
CalPERS Fire & Police Safety 0.0% 9.0% 9.0%
CalPERS Executive & Non-Rep Mgmt 3.6% 4.4% 8.0%
CalPERS All Other Units * 4.6% 3.4% 8.0%
PARS Temporary & Seasonal 3.5% 4.0% 7.5%
* Some units have agreed to full pickup
Human Resources Department
12
Reform Options
• Consider the “Time-in-Grade” exception which delays the EPMC payment for all newly hired employees up to five years.> The city would need to pass a
resolution and adjust its current contract with CalPERS.
Human Resources Department
13
Reform Options
• Eliminate EPMC• EPMC (PERS on PERS) is defined
as reporting the Employee Paid Member Contribution as Compensation Earned.> Example
$50,000 – Employee earnings + 8% - EPMC $54,000 – Employee is reported as
earning Note: City pays full employer and
employee PERS share of the $4,000 (which is PERS on PERS)
Human Resources Department
14
Reform Options
• Actions Proposed at State Level> Base final retirement salary on three
highest paid years worked;
> Calculate benefits only on base salary eliminating all “spiking;
> Eliminate the purchase of “air time”;
> Eliminate the availability of Employer Paid Member Contribution (EPMC);
Human Resources Department
15
Reform Options
> Require employees to pay the employees share of PERS;
> Remove caps on the percentage employees can pay for the total cost of PERS programs;
> Prohibit employees and employers from taking contribution “holidays”;
> Change PERS vesting period to seven years;
Human Resources Department
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Reform Options
> Have PERS provide a hybrid pension system option that caps the Defined Benefit PERS pension and supplement with a risk managed PERS defined contribution plan;
> Have PERS provide more formula choices with lower benefit local options.
Human Resources Department
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Reform Options
• Eliminate Retiree Medical (Non-Safety)> Current Agreement
Provide 850K annually All units must share cost Currently in negotiations with the
Retiree Medical Coalition
Some bargaining units have agreed to opt out
Human Resources Department
18
Next Steps
• Negotiate with miscellaneous employees’ Retirement Coalition regarding:> New retirement tier plan;
> Employer Paid Member Contribution (EPMC)
• Negotiate with miscellaneous employee bargaining groups for greater share of PERS contributions