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HomeMy Public PortalAboutCity Council_Ordinance No. 00-846U_Amendment to contract between City and Board of Administration of the California Public Employees' Retirement System_6/20/2000_Regular1 1 1 ORDINANCE NO. 00 -846U AN URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TEMPLE CITY AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF TEMPLE CITY AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM. WHEREAS on June 6, 2000, the City Council adopted a Resolution of Intention to approve an amendment to the contract between the California Public Employees Retirement System (Ca1PERS) and the City of Temple City to provide a 2% at 55 Retirement Benefit for City Miscellaneous Members; WHEREAS adoption of the fmal ordinance approving said amendment cannot be earlier than twenty (20) days after adoption of the Resolution of Intention; WHEREAS the effective date of the amendment to the contract between the California Public Employees Retirement System (Ca1PERS) and the City of Temple City cannot precede the effective date of the final ordinance; THE CITY COUNCIL OF THE CITY OF TEMPLE CITY DOES ORDAIN AS FOLLOWS: SECTION 1. The City Council fmds that an urgency ordinance is necessary to enact the amendment to the CaIPERS contract to be effective on July 1, 2000, the first day of the fiscal year; SECTION 2. That an amendment to the contract between the City Council of the City of Temple City and the Board of Administration of the Public Employees' Retirement System is hereby authorized, a copy of said amendment being attached hereto, marked Exhibit, and by such reference made a part hereof as though herein set out in full. SECTION 3. The Mayor of the City of Temple City is hereby authorized, empowered, and directed to execute this amendment for and on behalf of said agency. SECTION 4. The City Clerk shall certify to the passage and adoption of this urgency Ordinance, and to its approval by the Mayor, and shall cause the same to be published in the San Gabriel Valley Weekly, a newspaper of general circulation, printed, published and circulated in the City of Temple City. SECTION 5. The effective date of this ordinance shall be July 1, 2000. PASSED, APPROVED AND ADOPTED this 26th day of e,.2000. ATTEST: City Clerk t) MAYO Ordinance No. 00 -846U Page 2 1 I, City Clerk of the City of Temple City, do hereby certify that the foregoing ordinance, Ordinance No. 00 -846U, was introduced, duly passed, approved and adopted as an Urgency Ordinance at an adjourned regular meeting of the City Council of the City of Temple City held on the 26th day of June, 2000; was approved and signed by the Mayor and attested to by the City Clerk by the following vote: AYES: Councilman - Breazeal, Brook, Gillanders, Wilson, and Souder NOES: Councilman -None ABSENT: Councilman-None L u4 City Clerk 1 4tt CalPHIS 1 EXHIBIT California Public Employees' Retirement System a AMENDMENT TO CONTRACT Between the Board of Administration California Public Employees' Retirement System and the City Council City of Temple City The Board of Administration, California Public Employees' Retirement System, hereinafter referred to as Board, and the governing body of the above public agency, hereinafter referred to as Public Agency, having entered into a contract effective October 1, 1965, and witnessed September 20, 1965, and as amended effective July 1, 1974, October 1, 1981, January 1, 1984, April 11, 1990 and November 1, 1990 which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows: A. Paragraphs 1 through 11 are hereby stricken from said contract as executed effective November 1, 1990, and hereby replaced by the following paragraphs numbered 1 through 11 inclusive: 1. All words and terms used herein which are defined in the Public Employees' Retirement Law shall have the meaning as defined therein unless otherwise specifically provided. "Normal retirement age" shall mean age 55 for local miscellaneous members. 2. Public Agency shall participate in the Public Employees' Retirement System from and after October 1, 1965 making its employees as hereinafter provided, members of said System subject to all provisions of the Public Employees' Retirement Law except such as apply only on election of a contracting agency and are not provided for herein and to all amendments to said Law hereafter enacted except those, which by express provisions thereof, apply only on the election of a contracting agency. cAcc nr j NOT SIGN "EXHIBIT ONLY" 3. Employees of Public Agency in the following classes shall become members of said Retirement System except such in each such class as are excluded by law or this agreement: a. Employees other than local .safety members (herein referred to as local miscellaneous members). 4. In addition to the classes of employees excluded from membership by said Retirement Law, the following classes of employees shall not become members of said Retirement System: a. APPOINTIVE COMMISSIONS, BOARD AND COMMITTEES; b. PERSONS COMPENSATED ON AN HOURLY BASIS; c. CITY ATTORNEY; AND d. ALL SAFETY EMPLOYEES. 5. The percentage of final compensation to be provided for local miscellaneous members for each year of credited prior and current service shall be determined in accordance with Section 21354 of said Retirement Law, subject to the reduction provided therein for service prior to June 30, 1974, termination of Social Security, for members whose service has been included in Federal Social Security (2% at age 55 Full and Modified). 6. Public Agency elected and elects to be subject to the following optional provisions: a. Section 21573 (Third Level of 1959 Survivor Benefits). b. Section 20042 (One -Year Final Compensation). c. Section 20965 (Credit for Unused Sick Leave). d. Section 21024 (Military Service Credit as Public Service), Statutes of 1976. e. Sections 21624 and 21626 (Post- Retirement Survivor Allowance). 7. Public Agency, in accordance with Government Code Section 20790, ceased t'o be an "employer" for purposes of Section 20834 effective on October 1, 1981. Accumulated contributions of Public Agency shall be fixed and determined as provided in Government Code Section 20834, and accumulated contributions thereafter shall be held by the Board as provided in Government Code Section 20834. 8. Public Agency shall contribute to said Retirement System the contributions determined by actuarial valuations of prior and future service liability with respect to local miscellaneous members of said Retirement System. 1 1 1 1 1 9. Public Agency shall also contribute to said Retirement System as follows: a. Contributions required per covered member on account of the 1959 Survivor Benefits provided under Section 21573 of said Retirement Law. (Subject to annual change.) In addition, all assets and liabilities of Public Agency and its employees shall be pooled in a single account, based on term insurance rates, for survivors of all local miscellaneous members. b. A reasonable amount, as fixed by the Board, payable in one installment within 60 days of date of contract to cover the costs of administering said System as it affects the employees of Public Agency, not including the costs of special valuations or of the periodic investigation and valuations required by law. c. A reasonable amount, as fixed by the Board, payable in one installment as the occasions arise, to cover the costs of special valuations on account of employees of Public Agency, and costs of the periodic investigation and valuations required by law. 10. Contributions required of Public Agency and its employees shall be subject to adjustment by Board on account of amendments to the Public Employees' Retirement Law, and on account of the experience under the Retirement System as determined by the periodic investigation and valuation required by said Retirement Law. 11. Contributions required of Public Agency and its employees shall be paid by Public Agency to the Retirement System within fifteen days after the end of the period to which said contributions refer or as may be prescribed by Board regulation. If more or less than the correct amount of contributions is paid for any period, proper adjustment shall be made in connection with subsequent remittances. Adjustments on account of errors in contributions required of any employee may be made by direct payments between the employee and the Board. B. This amendment shall be effe on the BOARD OF ADMINISTRATION PUBLIC EMPLOYEES' RETI'` NT SYSTEM BY KENNETH W. MARZIO HIEF ACTUARIAL & EMP R SERVICES DIVISION PUBLIC EMPLOYF /I~RETIREMENT SYSTEM Amendment PERS- CON -702A (Rev. 8/96) day of .t • CITY COUNCIL 0 CITY OF TEMPLE CITY's‹. - :, , BY PRESIDING OFFFR .\, Witness Date Attest: Clerk CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 1998 MISCELLANEOUS PLAN FOR CITY OF TEMPLE CITY EMPLOYER NUMBER 607 Benefit Description: 21354, 2% @ 55 Full and Modified Formula The table below shows the change in the total present value of benefits for the proposed plan amendment. The present value of benefits represents the total dollars needed today to fund all future benefits for current members of the plan, i.e. without regard to future employees. The difference between this amount and current plan assets must be paid by future employee and employer contributions. As such, the change in the present value of benefits due to the plan amendment represents the "cost" of the plan amendment. However, for plans with excess assets some or all of this "cost" may already be covered by current excess assets. The Ca1PERS Board has adopted a resolution providing a one -time increase in the actuarial value of assets from 90% of market value to 95% of market value for the calculation of the July 1, 2000 through June 30, 2001 employer rate. This applies only to plans that amend their contract between July 1, 1999 and June 30, 2001. The tables below show the impact on the plan's Iiabilities due to the change in benefits and the change in assets due to the one -time change in actuarial method. It is not required, nor necessarily desirable, to have accumulated assets sufficient to cover the total present value of benefits until every member has left employment. Instead, the actuarial funding process calculates a regular contribution schedule of employee contributions and employer contributions (called normal costs) which are designed to accumulate with interest to equal the total present value of benefits by the time every member has left employment. As of each June 30, the actuary calculates the "desirable" level of plan assets as of that point in time by subtracting the present value of scheduled future employee contributions and future employer normal costs from the total present value of benefits. The resulting "desirable" level of assets is called the accrued liability. A plan with assets exactly equal to the plan's accrued liability is simply "on schedule" in funding that plan, and only future employee contributions and future employer normal costs are needed. A plan with assets below the accrued liability is "behind schedule ", or is said to have an unfunded liability, and must temporarily increase contributions to get back on schedule. A plan with assets in excess of the plan's accrued liability is "ahead of schedule ", or is said to have excess assets, and can temporarily reduce future contributions. A plan with assets in excess of the total present value of benefits is called super - funded, and neither future employer nor employee contributions are required- Of course, events such as plan amendments and investment or demographic gains or losses can change a plan's condition from year to year. For example, a plan amendment could cause a plan to move all the way from being super - funded to being in an unfunded position. April 12, 2000 4:19 PM Page 1 of 3 1 Pre - Amendment Change Due to Plan Amendment & Method Change Post - Amendment Post Method Change Total Present Value of Benefits Actuarial Value of Plan Assets Present Value of Future Employer and Employee Contributions $ 7,419,288 7,956,989 S 704,274 442,055 $ 8,123,562 8,399,044 $ (537,701) S 262,219 $ (275,482) It is not required, nor necessarily desirable, to have accumulated assets sufficient to cover the total present value of benefits until every member has left employment. Instead, the actuarial funding process calculates a regular contribution schedule of employee contributions and employer contributions (called normal costs) which are designed to accumulate with interest to equal the total present value of benefits by the time every member has left employment. As of each June 30, the actuary calculates the "desirable" level of plan assets as of that point in time by subtracting the present value of scheduled future employee contributions and future employer normal costs from the total present value of benefits. The resulting "desirable" level of assets is called the accrued liability. A plan with assets exactly equal to the plan's accrued liability is simply "on schedule" in funding that plan, and only future employee contributions and future employer normal costs are needed. A plan with assets below the accrued liability is "behind schedule ", or is said to have an unfunded liability, and must temporarily increase contributions to get back on schedule. A plan with assets in excess of the plan's accrued liability is "ahead of schedule ", or is said to have excess assets, and can temporarily reduce future contributions. A plan with assets in excess of the total present value of benefits is called super - funded, and neither future employer nor employee contributions are required- Of course, events such as plan amendments and investment or demographic gains or losses can change a plan's condition from year to year. For example, a plan amendment could cause a plan to move all the way from being super - funded to being in an unfunded position. April 12, 2000 4:19 PM Page 1 of 3 1 1 CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 1998 MISCELLANEOUS PLAN FOR CITY OF TEMPLE CITY EMPLOYER NUMBER 607 Benefit Description: 21354, 2% @ 55 Full and Modified Formula The changes in your plan's accrued liability, unfunded accrued liability, and the funded ratio as of June 30, 1998 due to the plan amendment are shown in the table below. While the tables above give the changes in the "cost" and funded status of the plan due to the amendment, there remains the question of what will happen to the employer contribution rate because of the change in plan provisions. Ca1PERS policy is to implement rate changes due to plan amendments immediately on the effective date of the change in plan benefits. In general, the policy also provides that the change in unfunded liability due to the plan amendment will be separately amortized over a period of 20 years from the effective date of the amendment and all other components of the plan's unfunded liability /excess assets will continue to be amortized separately. However, special rules have to be applied to plans with a current employer contribution rate of zero. The pre - amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or more years into the future. A plan amendment will use up some or all of the pre - amendment excess assets. If there is still excess assets (i.e. if the plan is still ahead of schedule) after the plan amendment, the remaining excess assets were spread over the greater of 5 years or the number of years for which the excess assets would keep the employer rate equal to zero. If the amendment uses up all excess assets and creates an unfunded liability (i.e. from being ahead of schedule to behind schedule), the post - amendment unfunded liability was amortized over 20 years. The table below shows the immediate short-term change in your plan's employer contribution rate due to the plan amendment. Rate Component Pre - Amendment Change Due to Plan Amendment & Method Change Post - Amendment Post Method Change Accrued Liability S 5,735,313 S 458.771 S 6,194,084 Assets 7,956,989 442,055 8,399,044 Unfunded Liability S (2,221,676) S 16,716 S (2,204,960) • 0.000% (0.000)% 0.000% Funded Ratio 138.7% 135.6% While the tables above give the changes in the "cost" and funded status of the plan due to the amendment, there remains the question of what will happen to the employer contribution rate because of the change in plan provisions. Ca1PERS policy is to implement rate changes due to plan amendments immediately on the effective date of the change in plan benefits. In general, the policy also provides that the change in unfunded liability due to the plan amendment will be separately amortized over a period of 20 years from the effective date of the amendment and all other components of the plan's unfunded liability /excess assets will continue to be amortized separately. However, special rules have to be applied to plans with a current employer contribution rate of zero. The pre - amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or more years into the future. A plan amendment will use up some or all of the pre - amendment excess assets. If there is still excess assets (i.e. if the plan is still ahead of schedule) after the plan amendment, the remaining excess assets were spread over the greater of 5 years or the number of years for which the excess assets would keep the employer rate equal to zero. If the amendment uses up all excess assets and creates an unfunded liability (i.e. from being ahead of schedule to behind schedule), the post - amendment unfunded liability was amortized over 20 years. The table below shows the immediate short-term change in your plan's employer contribution rate due to the plan amendment. Rate Component Pre - Amendment Change Due to Plan Amendment & Method Change Post- Amendment Post Method Change Normal Cost 6.413% 1.820% 8.233% Unfunded/Excess Asset Cost (6.413)% (1.820)% (8.233)% 1959 Survivor 0.000% 0.000% 0.000% Total Employer Rate 0.000% (0.000)% 0.000% Amortization Period 9999 Years 33 Years April 12, 2000 4:19 PM Page 2 of 3 CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 1998 MISCELLANEOUS PLAN FOR CITY OF TEMPLE CITY EMPLOYER NUMBER 607 Benefit Description: 21354, 2% @ 55 Full and Modified Formula Note that the change in normal cost in the table above may be much more indicative of the long term change in the employer contribution rate due to the plan amendment. The plan's unfunded liability /excess asset cost shown in the table above is a temporary adjustment to the employer contribution to "get the plan back on schedule". This temporary adjustment to the employer rate varies in duration from plan to plan. For example, a plan with initial excess assets being amortized over a short period of time will typically experience a large rate increase when excess assets are fully amortized. While a plan amendment for such a plan may produce little or no increase in the employer contribution rate now, the change in normal cost due to the plan amendment will become fully reflected in the employer contribution rate as soon as initial excess assets are fully amortized. If your agency is requesting cost information for two or more benefit changes, the cost of adopting more than one of these changes may not be obtained by adding the individual costs. Instead, a separate valuation should be done to provide a cost analysis for the combination of benefit changes. If the proposed plan amendment applies to only some of the employees in the plan, the rate change due to the plan amendment still applies to the entire plan, and is still based on the total plan payroll. Please note that the cost analysis provided in this docuinent may not be relied upon once the Ca1PERS actuarial staff have completed the next annual valuation, that is, the annual valuation as of June 30, 1999. If you have not taken action to amend your contract, and we have already mailed the June 30, 1999 annual valuation report, you must contact our office for an updated cost analysis, based on the new annual valuation. This actuarial valuation for this proposed plan amendment is based on the participant, benefits, and asset data used in the June 30, 1998 annual valuation, with the benefits modified if necessary to reflect what is currently provided under your contract with Ca1PERS, and further modified to reflect the proposed plan amendment. Descriptions of the actuarial methodologies, actuarial assumptions, and plan benefit provisions may be found in the appendices of the June 30, 1998 annual report. Please note that the results shown here are subject to change if any of the data or plan provisions changes from what was used in this study. It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the Ca1PERS Board of Administration according to provisions set forth in the California Public Employees' Retirement Law. , / Kung -pei Hwang, A.S.A., M.A.A.A. Senior Pension Actuary, Ca1PERS Fin Process Ids: Annual -34466 Base -41651 Proposal -41652 April 12, 2000 4:19 PM Page 3 of 3 2.5 2.4 2.3 2.2 2.1 1.9 St hart 1 Comparison Chart 1.6 1.5 1.4 1.3 1.2 1.1 50 51 52 53 54 55 56 57 58 59 60 61 62 63 Age at Retirement Page 1 64 65 66 67 68 69 70 —♦Mh 2% @ 60 --I -2% @ 55l Sheetl =16600 2% @ 55 50 1.092 1.426 51 1.156 1.522 52 1.224 1.628 53 1.296 1.742 54 1.376 1.866 55 1.46 2 56 1.552 2.052 57 1.65 2.104 58 1.758 2.156 59 1.874 2.21 60 2 2.262 61 2.134 2.314 62 2.272 2.366 63 2.418 2.418 64 2.418 2.418 65 2.418 2.418 66 2.418 2.418 67 2.418 2.418 68 2.418 2.418 69 2.418 2.418 70 2.418 2.418 Benefit Factor 2.5 2.4 2.3 2.2 2.1 2 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 Comparison Chart t) L Age at Retirement oo CO o - 0- 52 % ©60 -�-- 2% @ 55 Page 1 Formula Comparison 2% (a. 55 Formula 2% 60 Formula Age @ Benefit Service Final Unmodified Age @ Benefit Service Final Unmodified Retirement Factor X Credit X Comp = Allowance Retirement Factor X Credit X Comp = Allowance I 50 1.426 120 years $2,000 $570.40 J 1 55 2.000 20 years I $2,000 I $800.00 50 1.092 20 years $2,000 $436.80 51 1.156 21 $2,000 $485.52 52 1.224 22 $2,000 $538.56 53 1.296 23 $2,000 $596.16 55 1.460 20 $2,000 $584.00 56 1.552 21 $2,000 $651.84 57 1.65 '-)2 $2,000 $726.16 58 1.758 23 $2,000 $808.68