TO:
Honorable Mayor and Members of the City Council
THROUGH:
Mark Danaj, City Manager
FROM:
Teresia Zadroga-Haase, Director of Human Resources
SUBJECT:Title
Adopt Resolution No. 16-0052 to Amend the Contract Between the Board of Administration California Public Employees Retirement System and the City of Manhattan Beach to Provide Provisions of Retirement Law Section 20516 - Employee Cost Sharing (Human Resources Director Zadroga-Haase).
ADOPT RESOLUTION NO. 16-0052
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Recommended Action
RECOMMENDATION:
It is recommended that the City Council adopt Resolution No. 16-0052, 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 Manhattan Beach, to include the provisions of retirement law Government Code section 20516 (Employees Sharing Cost of Additional Benefits) for the Police Officers’ Association, Firefighters’ Association and Police Management Association (Unions).
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EXECUTIVE SUMMARY:
During the 2015 collective bargaining agreement negotiations with the Firefighters’ Association and subsequent negotiations with the Police and Police Management associations, City Council approved initiating the amendment process with CalPERS in order to change the manner in which employees make contributions toward the cost of their retirement benefits. The City must amend the contract with CalPERS to include retirement law Government Code section 20516(a) in order to allow employees to share the cost of “employer contributions” to CalPERS retirement system on a pre-tax basis.
CalPERS has a detailed process in order for an agency to amend its contract when the change in benefit affects the employees’ contribution rate. Step 1 is for the Unions and City to agree to start the process to amend the CalPERS retirement contract. Step 2 requires the City Council to adopt a Resolution of Intention to approve the amendment. Step 3 requires a secret ballot election for each bargaining unit affected (per Government Code 20474). Step 4 requires the City Council to adopt an Ordinance authorizing an amendment to contract. The final step is for implementation 30 days after the Ordinance is approved by City Council. The recommended action is Step 2 of the process.
FISCAL IMPLICATIONS:
No fiscal implications associated with the recommended action.
BACKGROUND:
CalPERS retirement benefits are funded by contributions from the employee and employer and investment earnings. The safety employee contribution is fixed at 9% of the employees’ salary or 50% of Normal Cost (depending on tier) Retirement law Government Code Section 20516 permits employees to contribute to the employer’s normal cost contribution through CalPERS Cost Sharing provisions.
In an effort to reduce the City’s CalPERS employer contribution cost in 2013, the City negotiated for the three unions to contribute 3% (Cost Sharing) toward the employer contribution. These contributions are made on an after-tax basis pursuant to Government Code 20516(f). This is in addition to the statutorily required employee contributions.
In order to allow the 3% Cost Sharing contribution to be made on a pre-tax basis, the City and the bargaining units need to agree to amend the City’s CalPERS contract to include Government Code Section 20516(a). On January 19, 2016 and July 5, 2016, City Council approved the Firefighters’ Association Memorandum of Understanding (MOU) and side letters for the Police Officers’ Association and Police Management Association (respectively) for the City to initiate the process to amend the City’s retirement contract with CalPERS regarding the Employee Cost Sharing contributions.
DISCUSSION:
The next step in the process is for the City Council to adopt a Resolution of Intention to Approve an Amendment to Contract (Attachment 1). A draft version of the PERS Amendment to Contract is attached to this report (Attachment 2). In addition to adopting the Resolution of Intention, a Certification of Governing Body’s action and a Certification of Compliance with Government Code Section 20516 must be completed (Attachment 3 and 4). At least 20 days after adoption of the Resolution of Intention, the City Council must adopt an Ordinance authorizing an amendment to Contract.
During the minimum 20 day wait period, the unions must hold a secret ballot election for employees affected by the contract amendment. Government Code 20474 requires an election when the contract amendment changes the employees’ rate of contribution. The public safety bargaining units should conduct the secret ballot elections within ten (10) days of Council Adoption of the Resolution of Intention. A sample employee ballot is attached for informational purposes (Attachment 5). If the union majority does not approve the change, the amendment will not move forward. The employees will continue to contribute the 3% of the employer cost on an after-tax basis.
In anticipation of positive employee election results, the Ordinance will be scheduled on the City Council agenda for the October 18, 2016 or subsequent meeting. After the Ordinance is adopted, there is a 30 day wait period for the contract amendment to go into effect. The contract amendment will be effective the beginning of the first full pay period following the wait period.
Staff recommends moving forward in the amendment process by adopting the Resolution of Intention. Amending the CalPERS contract to incorporate Government Code 20516(a) does not increase the City’s cost for retirement benefits but allows the employees’ cost share contribution toward the employer cost for retirement benefits to be deducted on a pre-tax basis, reducing out-of-pocket costs for our public safety employees.
It should also be noted that when drafting contract amendments, CalPERS is adding standard indemnification language to the contract which indemnifies CalPERS against claims arising from non-CalPERS retirement programs a public agency may participate in or from a dispute between the City and one or more of its employees (see paragraph 3 of the amended contract in Attachment 2).
POLICY ALTERNATIVES:
With the approval of the Firefighters’ Association MOU in January 19, 2016 and the Side Letter Agreements for Police Officers’ Association and Police Management Association in July 5, 2016, the City has met in good faith through the collective bargaining process and agreed to proceed with the CalPERS contract amendment process. Therefore, the only viable alternative is to proceed with the contract amendment process.
PUBLIC OUTREACH/INTEREST:
A public hearing will be held for the adoption of the Ordinance authorizing an amendment to contract on October 18, 2016.
LEGAL REVIEW
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
Attachments:
1. Resolution of Intention
2. Draft PERS Amendment to Contract
3. Certification of Governing Body’s Action
4. Certification of Compliance
5. Sample Employee Ballot