City Council
MEETING DATE: 11/12/2014
TITLE:
Title
California Public Employees Retirement System Lump Sum Payment
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FROM:
Tami Scott, Administrative Services Director
RECOMMENDATION:
Recommendation
Staff recommends that the City Council authorize an allocation of $2.65 million from the FYE 2013/2014 surplus as well as $1.9 million from the Insurance Fund to pay a Lump Sum payment to the California Public Employees Retirement System (CalPERS) to eliminate the employer contribution rate for the Miscellaneous employee group's unfunded Side Fund. This will generate an annual savings to the general fund of approximately $300,000-325,000 (equivalent to a 9% interest rate) for the next 21 years.
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BACKGROUND:
In July 2012, the City had a significant layoff/retirement which resulted in a decrease of more than 20 miscellaneous group employees. This resulted in the Cathedral City Miscellaneous employee group joining an overall pool, thus creating an unfunded liability of $4.6 million dollars in what is called a "side fund".
DISCUSSION:
A "side fund" is the mechanism CalPERS utilizes when negotiated retirement formulas change for member agencies in a retirement pool, which our miscellaneous employee group now belongs to part of a larger CalPERS retirement pool. The City has since retooled its retirement and health benefit formulas, which will also assist in ongoing reductions to future unfunded liabilities.
In the spring of 2013, the CalPERS board approved a reduction in investment rates of return on deposits of monies paid into CalPERS, from 7.75% to 7.5%, which will increase the City's estimated annual contribution to CalPERS, commencing with FY 2015/16 by an estimated $1.6 million per year. This will be further amplified if the side funds are not paid off. By paying off the side fund unfunded liability now, we will reduce this significant impact to the general fund in the future.
FISCAL IMPACT:
Annual savings ...
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