HomeMy WebLinkAbout2004 CON CalPERS - Amendment to ContractCa1PERS
California
Public Employees' Retirement System
AMENDMENT TO CONTRACT
Between the
Board of Administration
California Public Employees' Retirement System
and the
City Council
City of National 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 July 1,
1948, and witnessed May 1, 1948, and as amended effective March 1, 1954, July 1,
1954, April 1, 1956, April 1, 1970, December 1, 1972, September 28, 1973, October 1,
1973, March 1, 1974, October 1, 1974, January 16, 1977, October 16, 1978, October 1,
1980, July 16, 1983, January 1, 1985, December 27, 1988, December 12, 1989,
Novmeber 15, 1991, December 27, 1991, June 11, 1993, May 2, 1996, July 9, 2002 and
September 17, 2002 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 September 17, 2002, and hereby replaced by the following paragraphs
numbered 1 through 14 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 60 for local miscellaneous members and age 50 for local safety
members.
0zuez-33
2. Public Agency shall participate in the Public Employees' Retirement
System from and after July 1, 1948 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. 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 Fire Fighters (herein referred to as local safety members);
b. Local Police Officers (herein referred to as local safety members);
c. 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:
NO ADDITIONAL EXCLUSIONS
5. 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 20305 supersedes this contract provision by providing that any
such temporary and/or seasonal employees are excluded from PERS
membership subsequent to January 1, 1975.
6. The percentage of final compensation to be provided for each year of
credited prior and current service as a local miscellaneous member in
employment before and not on or after September 17, 2002 shall be
determined in accordance with Section 21354 of said Retirement Law
(2% at age 55 Full).
7. The percentage of final compensation to be provided for each year of
credited prior and current service as a local miscellaneous member in
employment on or after September 17, 2002 shall be determined in
accordance with Section 21354.3 of said Retirement Law (3% at age 60
Full).
8. 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).
9. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 20425 ("Local Police Officer" shall include employees of a
police department who were employed to perform identification or
communication duties on August 4, 1972 and who elected to be
local safety members).
b. Section 21222.1 (One -Time 5% Increase - 1970). Legislation
repealed said Section effective January 1, 1980.
c. Sections 21624 and 21626 (Post -Retirement Survivor Allowance).
d. Section 21573 (Third Level of 1959 Survivor Benefits).
e. Section 20965 (Credit for Unused Sick Leave).
f. Section 21325 (One -Time 3% to 15% Increase For Local
Miscellaneous Members Who Retired or Died Prior to January 1,
1974). Legislation repealed said Section effective January 1, 2002.
g.
Section 20042 (One -Year Final Compensation).
h. Section 20903 (Two Years Additional Service Credit).
10. Public Agency, in accordance with Government Code Section 20790,
ceased to be an "employer" for purposes of Section 20834 effective on
January 16, 1977. 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.
11. 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.
12. 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 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.
13. 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.
14. 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 6 day of July , 2004
BOARD OF ADMINISTRATION CITY COUNCIL
PUBLIC EMPLOYEES' RETIREMENT SYSTEM CITY OF NATIONAL CITY
BY , �%% c�7t.-� BY
KEN H . MARZ N, CHIEF PRESIDIA i FIER
ACTUARI L & EMPLOYER SERVIC S DIVISION
PUBLIC MPLOYEES' RETIREMENT SYSTEM
Witness Date
Attest:
Cler
AMENDMENT ER# 0190
PERS-CON-702A (Rev. 8\02)
ZSC-L-33
City of National City, California
COUNCIL AGENDA STATEMENT
.AEETING DATE March 16, 2004
AGENDA ITEM NO.
2
(-ITEM TITLE
RESOLUTION TO APPROVE AN AMENDMENT TO CONTRACT BETWEEN
BOARD OF ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM (CaIPERS) AND THE CITY COUNCIL OF NATIONAL
CITY
PREPARED BY DEPARTMENT
Patt z ary / Human Resources
EXPLANATION Interim Director of Human Resources
The Memorandum of Understanding between the City of National City and the National
City Police Officers' Association for the period July 1, 2002 through June 30, 2005,
approved by City Council in Resolution No. 2002-133 on September 3, 2002, provides
that "The City shall amend its contract with PERS to provide a retirement formula of
3% at 50 effective July 1, 2004, to eligible retirees from the POA after effective date."
(Article 18, Public Employees' Retirement System, Section 3, The Plan Definition [e]).
Government Code Section 7507 requires that the future annual costs of the proposed
contract amendment be made public. Those values, as identified in the amendment
actuarial valuation for the adoption of this plan amendment include:
1) Change in the Present Value of Benefits $4,991,590
2) Change in the Accrued Liability $3,801,772
3) Change in the Total Employer Rate 11.028%
This resolution begins the contract amendment process.
( Environmental Review N/A
Financial Statement
Approved By
Inonce •I ?•tor
The total CaIPERS contribution for FY 2004/2005 for the National City Police Officers' Association in j:ses
by 11.028% from $1,214.226 to $1,662,770 to provide the 3% @ 50 benefit. The FY 2004/2005 budget
will be adjusted to reflect the cost increase. Account No.
STAFF RECOMMENDATION
Recommend approval of the proposed Resolution.
BOARD / COMMISSION RECOMMENDATION
N/A
ATTACHMENTS ( Listed Below) Resolution No. 2004-41
1. Resolution
2. Cost Amendment Cost Analysis - Valuation Basis: June 30, 2002
A-200 (9/99)
RESOLUTION NO. 2004 — 41
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF NATIONAL CITY
GIVING NOTICE OF INTENTION TO APPROVE AN AMENDMENT
TO CONTRACT WITH THE BOARD OF ADMINISTRATION
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (CALPERS)
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 21362.2 (3% @ 50 Full formula)
for local police members.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City
of National City 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
an "Exhibit" and by this reference made a part hereof.
PASSED and ADOPTED this 16th day of March, 2004.
Niza, Mayor
ATTEST:
P 2
Mich el R. Dalla, ity Clerk
APPROVED AS TO FORM:
George H. Eiser, Ill
City Attorney
Passed and adopted by the Council of the City of National City, California, on March 16, 2004,
by the following vote, to -wit:
Ayes: Councilmembers Inzunza, Morrison, Natividad, Parra, Ungab.
Nays: None.
Absent: None.
Abstain: None.
AUTHENTICATED BY:
NICK INZUNZA
Mayor of the City of National City, California
City Clerk of the City of National City, California
By:
Deputy
I HEREBY CERTIFY that the above and foregoing is a full, true and correct copy of
RESOLUTION NO. 2004-41 of the City of National City, California, passed and adopted by the
Council of said City on March 16, 2004.
City Clerk of the City of National City, California
By:
Deputy
CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2002
SAFETY POLICE PLAN FOR CITY OF NATIONAL CITY
EMPLOYER NUMBER 190
Benefit Description: 21362.2, 3% @ 50 Full Formula
Present Value of Projected Benefits
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.
As of June 30, 2002
Current Plan
Post -Amendment
Total Assets at Market Value (MVA)
$
34,331,084
$
34,331,084
Actuarial Value of Assets (AVA)
37,764,192
37,764,192
AVA t MVA
110.0%
110.0%
Present Value of Projected Benefits (PVB)
$
52,731,353
$
57,722,943
Actuarial Value of Assets (AVA)
37,764,192
37,764,192
Present Value of Future Employer and Employee
Contributions (PVB — AVA)
$
14,967,161
$
19,958,751
Change to PVB
4,991,590
Accrued Liability
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(AVA) 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.
December 4, 2003 Page 1 of 5
3:28 PM
CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2002
SAFETY POLICE PLAN FOR CITY OF NATIONAL CITY
EMPLOYER NI4VIBER 190
Benefit Description: 21362.2, 3% @ 50 Full Formula
The changes in your plan's accrued liability, unfunded accrued liability, and the funded ratio as of June
30, 2002 due to the plan amendment are shown in the table below.
As of June 30, 2002
Current Plan
Post -Amendment
Entry Age Normal Accrued Liability (AL)
$
40,403,391
$
44,205,163
Actuarial Value of Assets (AVA)
37 764 192
37,764,192
Unfunded Liability/(Excess Assets) (UAL = AL— AVA)
$
2,639,199
$
6,440,971
Funded Ratio (AVA / AL)
93.5%
85.4%
Change to AL
3,801,772
Total Employer Contribution Rate
While the tables above give the changes in the accrued liability 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. This change is displayed as the "Change to Total Employer Rate" on the
following page. If the contract amendment effective date is on or before June 30, 2004, the change in the
employer contribution rate should be added to the employer's current rate. 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, your actuary may choose to apply different rules 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. In order to maintain our goal of providing rates that are relatively stable, while
taking into account known or expected future events, your actuary may decide to spread any remaining
excess assets over a single number of years. This is known as a "fresh start" and will generally be for a
period not less than 15 years, and in no case less than 5 years. You may call your actuary to discuss
further alternative financing options. If the amendment uses up all excess assets and creates an unfunded
liability (i.e. from being ahead of schedule to behind schedule), the total post -amendment unfunded
liability may be amortized over 20 years.
In no case may the annual contribution with regard to a positive unfunded liability be less than the amount
which would be required to amortize that unfunded liability, as a level percent of pay, over 30 years.
The table on the following page shows the change in your plan's employer contribution rate due to the
plan amendment for fiscal 2004-2005.
December 4, 2003 Page 2 of 5
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CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2002
SAFETY POLICE PLAN FOR CITY OF NATIONAL CITY
EMPLOYER NUMBER 190
Benefit Description: 21362.2, 3% @ 50 Full Formula
As of June 30, 2002
Current Plan
Post -Amendment
2004-2005 Employer Rate
Payment for Normal Cost
14.289%
18.706%
Payment on Amortization Bases
6.358%
12.969%
Payment for 1959 Survivor Benefit Program
0.000%
0.000%
Total Employer Rate
20.647%
31.675%
Change to Normal Cost
4.417%
Change to Total Employer Rate
11.028%
Current Amortization Base 1
Multiple Base
Amendment Amortization Base
- Fresh Start 2
N/A
- Multiple Base 3
20-year
2004-2005 Employee Rate
Total Employee Rate
9.000%
9.000%
Change to Total Employee Rate
0.000%
2005-2006
Estimated Employer Rate ° (recognizing 4%
investment return for 2002-2003)
24.0%
35.1%
Projection Amortization Base
Mulitple Base
Multiple Base
1— Details of the current amortization base are shown on page 10 of June 30, 2002 annual valuation report. If you have adopted any other
subsequent amendments, the current amortization base is the schedule after these adopted amendments.
2 - If a fixed number of years is shown, it means that the current unfunded actuarial liability is projected and amortized over this fixed number of
years. This amortization replaces the amortization schedule shown in your June 30, 2002 annual valuation and any other subsequent
amendments you have adopted.
3 - If 20-year is shown, it means that the change in liability due to plan amendments is amortized separately over a 20-year period. This
amortization schedule is in addition to the amortization schedule shown in the June 30, 2002 annual valuation and any other subsequent
amendments you have adopted.
4 - Excludes 1959 Survivor Benefit Program rate.
In the above table, the information shown in the 2004-2005 box represents the actual initial contribution
rate that will apply during fiscal 2004-2005 if you adopt the amendment. However, these figures do not
incorporate the 4% investment return in 2002-2003. The estimated employer rates shown in the 2005-
2006 box will give you a good estimate of what to expect in 2005-2006
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 payment on
amortization bases 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.
December 4, 2003 Page 3 of 5
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CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2002
SAFETY POLICE PLAN FOR CITY OF NATIONAL CITY
EMPLOYER NUMBER 190
Benefit Description: 21362.2, 3% @ 50 Full Formula
Disclosure
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 must 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.
Any mandated benefit improvements not included in the June 30, 2002 annual valuation have not been
incorporated into this cost analysis.
Please note that the cost analysis provided in this document 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, 2003.
If you have not taken action to amend your contract, and we have already completed the June 30, 2003
annual valuation report, you must contact our office for an updated cost analysis, based on the new annual
valuation.
Descriptions of the actuarial methodologies, actuarial assumptions, and plan benefit provisions may be
found in the appendices of the June 30, 2002 annual report. Please note that the results shown here are
subject to change if any of the data or plan provisions change from what was used in this study.
Certification
This actuarial valuation for the proposed plan amendment is based on the participant, benefits, and asset
data used in the June 30, 2002 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. The valuation has been performed in accordance with standards of practice prescribed by the
Actuarial Standards Board, and 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.
Nancy E. Campbell, A.S.A., M.A.A.A.
Enrolled Actuary
Senior Pension Actuary, CaIPERS
Fin Process Ids: Annual--145071 Base-163489 Proposal-163490
December 4, 2003
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Page 4 of 5
CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2002
SAFETY POLICE PLAN FOR CITY OF NATIONAL CITY
EMPLOYER NUMBER 190
Benefit Description: 21362.2, 3% @ 50 Full Formula
Summary of Plan Amendments Valued
COVERAGE GROUP 75001
Pre -Amendment
The Service Retirement benefit calculated for service earned by this group of members is a
monthly allowance equal to the product of the 2% @ 50 benefit factor, years of service, and
final compensation. (Final compensation is reduced by $133.33 per month for members with
a modified formula). The benefit factors for retirement at integral ages are shown below:
Retirement 2% at 50
Age Factor
50 2.000%
51 2.140%
52 2.280%
53 2.420%
54 2.560%
55 and older 2.700%
Post -Amendment
• The Service Retirement benefit calculated for service earned by this group of members is a
monthly allowance equal to the product of the 3% @ 50 benefit factor, years of service, and
final compensation. (Final compensation is reduced by $133.33 per month for members with
a modified formula). The benefit factors for retirement at integral ages are shown below:
Retirement 3% at 50
Age Factor
50 3.000%
51 3.000%
52 3.000%
53 3.000%
54 3.000%
55 and older 3.000%
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