Amendment to Add a Second Retirement Tier for Nonsworn EmployeesI oW N p,� MEETING DATE: 05/21/2012
ITEM NO.
COUNCIL AGENDA REPORT 9
!ps GA.
DATE: May 17, 2012
TO: MAYOR AND TOWN COUNCIL
FROM: GREG LARSON, TOWN MANAGER
SUBJECT: APPROVE AN AMENDMENT TO CONTRACT BETWEEN THE BOARD OF
ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT
SYSTEM AND THE TOWN COUNCIL OF THE TOWN OF LOS GATOS TO
ADD A SECOND RETIREMENT TIER FOR NONSWORN
( "MISCELLANEOUS ") EMPLOYEES
RECOMMENDATION:
1. Adopt Resolution of Intention to add a second retirement tier for Nonsworn ( "Miscellaneous ")
employees.
2. Introduce Ordinance to amend contract with Ca1PERS to institute a two -tier retirement plan for
Non -Sworn ( "Miscellaneous ") employees
BACKGROUND:
In August 2010, the Town Council accepted the Santa Clara County Civil Grand Jury Report, "Cities
Must Rein in Unsustainable Employee Cost," which took a broad look at employee costs and
recommended solutions to control costs so that "...cities over time can achieve fiscal and
organizational stability and eliminate budget deficits."
In the report the Civil Service Grand Jury recommended that cities should negotiate agreements to
institute a two -tier system that increases the retirement age and reduces the benefit formula. Since
that time, the Town's negotiators have completed the meet and confer process and reached
agreement for a two -tier pension formula for non -sworn and management employees. As such, the
Town will amend its contract with the California Public Employees Retirement System (PERS) to
change the retirement benefit to 2% at 60 using the three -year final average compensation formula.
The benefit is currently 2.5% at 55 using the single highest year compensation formula.
PREPARED BY : RUMI PORTILLO ru4w
Human Resources Director
Reviewed by: Assistant Town Manager Town Attorney
Revised: 05/17/2012 2:48 PM
Reformatted: 5/30/02
C: \Users\iportillo \Desktop \Council Staff Report Two Tier Retirement May 17 2012.doc
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MAYOR AND TOWN COUNCIL
SUBJECT: APPROVE AN AMENDMENT TO CONTRACT BETWEEN THE BOARD
OF ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM AND THE TOWN COUNCIL OF THE TOWN
OF LOS GATOS TO ADD A SECOND RETIREMENT TIER FOR
NONSWORN ( "MISCELLANEOUS ") EMPLOYEES
May 17, 2012
The two -tier pension formula is effective for newly hired nonsworn ( "miscellaneous ") employees
after August 1, 2012. Nonsworn, or "Miscellaneous" employees include those represented by
AFSCME and T.E.A. and unrepresented Management and Confidential employees. As vested
employees, employees hired prior to August 1, 2012 will remain at 2.5% at 55 with Single Highest
Year. To implement the contract amendment in accordance with PERS law, this report recommends
the adoption of a Resolution of Intention and Introduction of Ordinance to amend contract.
DISCUSSION:
This recommended contract change is made in accordance with the following California
Government Code Sections:
• Section 20475: Different Level of Benefits provided for New Employees
• Section 21353: 2% @ 60 Full formula
• Section 20037: Three Year Final Compensation
By adopting the Resolution of Intent and introducing the ordinance, Council will enable staff to
continue its process to implement the contract changes. Staff will present the final Ordinance
authorizing an amendment to the Town's contract on June 18, 2012.
FISCAL IMPACT:
This action will result in long term future savings realized gradually as employees working under the
existing benefit formula retire and new employees working under the reduced benefit formula are
hired. This action will have no immediate fiscal impact at this time; however, decreases in the
employer rate will occur as employees are hired into the Second Tier.
Attachments:
1. Resolution of Intention to Approve an Amendment to Contract between the Board of
Administration California Public Employees' Retirement System and the Town Council of
the Town of Los Gatos.
2. Ordinance amending the Ca1PERS contract.
3. Amendment to Contract Between Ca1PERS and Town of Los Gatos
RESOLUTION NO. 2012-
ADOPT RESOLUTION OF INTENTION TO APPROVE AN AMENDMENT TO CONTRACT
BETWEEN TOWN COUNCIL OF THE TOWN OF LOS GATOS AND THE BOARD OF
ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
TO ADD A SECOND RETIREMENT TIER (TO PROVIDE SECTION 21353 (2% @ 60 FULL
FORMULA) FOR NONSWORN ( "MISCELLANEOUS ") EMPLOYEES
WHEREAS, the Public Employees' Retirement Law permits the participation of public
agencies and their employees in the Public Employees' Retirement System by the execution of a contract,
and sets forth the procedure by which said public agencies may elect to subject themselves and their
employees to amendments to said Law; and
WHEREAS, one of the steps in the procedures to amend this contract is the adoption by
the governing body of the public agency of a resolution giving notice of its intention to approve an
amendment to said contract, which resolution shall contain a summary of the change proposed in said
contract; and
WHEREAS, the following is a statement of the proposed change: To provide Section
20475 (Different Level of Benefits). Section 21353 (2% @ 60 Full formula) and Section 20037 (Three-
Year Final Compensation) are applicable to local miscellaneous members entering membership for the
first time in the miscellaneous classification after the effective date of this amendment to contract.
NOW, THEREFORE, BE IT RESOLVED, that the governing body of the above
agency does hereby give notice of intention to approve an amendment to the contract between said public
agency and the Board of Administration of the Public Employees' Retirement System, a copy of said
amendment being attached hereto, as "Exhibit A" and by this reference made a part hereof.
PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of
Los Gatos, California, held on the 21S day of May, 2012 by the following vote:
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED:
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
/s/ Mazarin Vakharia
CLERK ADMINISTRATOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTACHMENT 1
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ORDINANCE
ORDINANCE OF THE TOWN OF LOS GATOS AUTHORIZING AN AMENDMENT
TO THE CONTRACT BETWEEN THE TOWN COUNCIL OF THE TOWN OF LOS
GATOS AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC
EMPLOYEES' RETIREMENT SYSTEM TO ADD A SECOND RETIREMENT TIER
(TO PROVIDE SECTION 21353 (2% @ 60 FULL FORMULA) FOR NONSWORN
( "MISCELLANEOUS ") EMPLOYEES
THE TOWN COUNCIL OF THE TOWN OF LOS GATOS DOES ORDAIN AS
SECTION I
That an amendment to the contract between the Town Council of the Town of Los Gatos and the
Board of Administration, California Public Employees' Retirement System is hereby authorized,
a copy of said amendment being attached hereto, marked "Exhibit A ", and by such reference
made a part hereof as though herein set out in full.
SECTION II
The Mayor of the Town of Los Gatos is hereby authorized, empowered, and directed to execute
said amendment for and on behalf of said Agency.
SECTION III
In the event that any part of this ordinance is held to be invalid, the invalid part or parts
shall be severed from the remaining portions which shall remain in full force and effect.
SECTION IV
This ordinance was introduced at a regular meeting of the Town Council of the Town of
Los Gatos on May 21 , 20 12 and adopted by the following vote as an ordinance of the Town of
Los Gatos at a regular meeting of the Town Council of the Town of Los Gatos on June 18 , 2012
This ordinance will be effective August 1, 2012.
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED:
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK ADMINISTRATOR OF THE TOWN OF LOS GATOS ATTACHMENT 2
LOS GATOS, CALIFORNIA Rev: 6/2/04
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caiPexS
Lam.. .1
California
Public Employees' Retirement System
AMENDMENT TO CONTRACT
Between the
Board of Administration
California Public Employees' Retirement System
and the
Town Council
Town of Los Gatos
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 April 1,
1972, and witnessed March 1, 1972, and as amended effective August 2, 1972, June 1,
1976, July 1, 1976, October 1, 1976, January 4, 1990, December 16, 1992, August 6,
1997, June 24, 2001 and June 29, 2008 which provides for participation of Public
Agency in said System, Board and Public Agency hereby agree as follows:
A. Paragraphs 1 through 15 are hereby stricken from said contract as executed
effective June 29, 2008, and hereby replaced by the following paragraphs
numbered 1 through 17 inclusive:
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 entering membership in
the miscellaneous classification on or prior to the effective date of this
amendment to contract, age 60 for local miscellaneous members entering
membership for the first time in the miscellaneous classification after the
effective date of this amendment to contract and age 50 for local safety
members.
2. Public Agency shall participate in the Public Employees' Retirement
System from and after April 1, 1972 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.
3. Public Agency agrees to indemnify, defend and hold harmless the
California Public Employees' Retirement System (CalPERS) and its
trustees, agents and employees, the CalPERS Board of Administration,
and the California Public Employees' Retirement Fund from any claims,
demands, actions, losses, liabilities, damages, judgments, expenses and
costs, including but not limited to interest, penalties and attorneys fees
that may arise as a result of any of the following:
(a) Public Agency's election to provide retirement benefits,
provisions or formulas under this Contract that are different than
the retirement benefits, provisions or formulas provided under
the Public Agency's prior non- CalPERS retirement program.
(b) Public Agency's election to amend this Contract to provide
retirement benefits, provisions or formulas that are different than
existing retirement benefits, provisions or formulas.
(c) Public Agency's agreement with a third party other than
CalPERS to provide retirement benefits, provisions, or formulas
that are different than the retirement benefits, provisions or
formulas provided under this Contract and provided for under
the California Public Employees' Retirement Law.
(d) Public Agency's election to file for bankruptcy under Chapter 9
(commencing with section 901) of Title 11 of the United States
Bankruptcy Code and /or Public Agency's election to reject this
Contract with the CalPERS Board of Administration pursuant to
section 365, of Title 11, of the United States Bankruptcy Code
or any similar provision of law.
(e) Public Agency's election to assign this Contract without the prior
written consent of the CalPERS' Board of Administration.
(f) The termination of this Contract either voluntarily by request of
Public Agency or involuntarily pursuant to the Public Employees'
Retirement Law.
(g) Changes sponsored by Public Agency in existing retirement
benefits, provisions or formulas made as a result of
amendments, additions or deletions to California statute or to
the California Constitution.
4. 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. Local Police Officers (herein referred to as local safety members);
b. Employees other than local safety members (herein referred to as
local miscellaneous members).
5. 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. ALL PERSONS EMPLOYED ON OR PRIOR TO CONTRACT
DATE WHO WERE MEMBERS OF THE LOCAL SYSTEM
EXCEPT THOSE IN EMPLOYMENT ON CONTRACT DATE WHO
WAIVED THEIR RIGHTS UNDER THE LOCAL SYSTEM AND
THOSE PERSONS WHO WAIVED THEIR RIGHTS BETWEEN
MARCH 18 AND MARCH 26, 1976.
6. Prior to January 1, 1975, those members who were hired by Public
Agency on a temporary and /or seasonal basis not to exceed 6 months
were excluded from PERS membership by contract. Government Code
Section 20336 superseded this contract provision by providing that any
such temporary and /or seasonal employees are excluded from PERS
membership subsequent to January 1, 1975. Legislation repealed and
replaced said Section with Government Code Section 20305 effective July
1, 1994.
7. Assets heretofore accumulated with respect to members under the local
retirement system who waived their rights under that system have been
transferred to the Public Employees' Retirement System on April 1, 1972
or between March 18, and March 26, 1976 and applied against the liability
for prior service incurred thereunder. That portion of assets so transferred
which represent the accumulated contributions (plus interest thereof)
required of the employees under said local system have been credited to
the individual membership account of each such employee under the
Public Employees' Retirement System.
8. The percentage of final compensation to be provided for each year of
credited prior and current service for local miscellaneous members in
employment before and not on or after June 29, 2008 shall be determined
in accordance with Section 21354 of said Retirement Law, subject to the
reduction provided therein for service prior to June 30, 1976, termination
of Social Security, for members whose service has been included in
Federal Social Security (2% at age 55 Full and Modified).
9. The percentage of final compensation to be provided for each year of
credited prior and current service for local miscellaneous members in
employment on or after June 29, 2008 and not entering membership for
the first time in the miscellaneous classification after the effective date of
this amendment to contract shall be determined in accordance with
Section 21354.4 of said Retirement Law, subject to the reduction provided
therein for service prior to June 30, 1976, termination of Social Security,
for members whose service has been included in Federal Social Security
(2.5% at age 55 Full and Modified).
10. The percentage of final compensation to be provided for each year of
credited current service as a local miscellaneous member entering
membership for the first time in the miscellaneous classification after the
effective date of this amendment to contract shall be determined in
accordance with Section 21353 of said Retirement Law (2% at age 60
Full).
11. The percentage of final compensation to be provided for each year of
credited prior and current service as a local safety member shall be
determined in accordance with Section 21362.2 of said Retirement Law
(3% at age 50 Full).
12. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 21536 (Local System Service Credit Included in Basic
Death Benefit).
b. Sections 21624 and 21626 (Post- Retirement Survivor Allowance).
C. Section 21574 (Fourth Level of 1959 Survivor Benefits).
d. Section 20042 (One -Year Final Compensation) for those local
miscellaneous members entering membership on or prior to the
effective date of this amendment to contract and for local safety
members.
e. Section 21024 (Military Service Credit as Public Service).
f. Section 20475 (Different Level of Benefits). Section 21353 (2% @
60 Full formula) and Section 20037 (Three -Year Final
Compensation) are applicable to local miscellaneous members
entering membership for the first time in the miscellaneous
classification after the effective date of this amendment to contract.
13. Public Agency, in accordance with Government Code Section 20790,
ceased to be an "employer" for purposes of Section 20834 effective on
July 1, 1976. 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.
14. 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 and local safety members of said
Retirement System.
15. 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 21574 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 and local safety 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.
16. 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.
17. 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 effective on the day of
BOARD OF ADMINISTRATION TOWN COUNCIL
PUBLIC EMPLOYEES' RETIREMENT SYSTEM TOWN OF LOS GATOS
BY BY
KAREN DE FRANK, CHIEF PRESIDING OFFICER
CUSTOMER ACCOUNT SERVICES DIVISION
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Witness Date
Attest:
Clerk
AMENDMENT CaIPERS ID #4589482285
PERS- CON -702A