City Council
MEETING DATE: 2/11/2015
TITLE:
Title
Resolution - Cost Sharing of CalPERS Costs & Member Contribution
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FROM:
Tami Scott, Administrative Services Director
RECOMMENDATION:
Recommendation
Staff recommends that the City Council adopt a resolution providing for a cost sharing arrangement between the City and Non-Represented "Classic" employees, as defined by CalPERS, memorializing that the City will contribute the 7% normal member contribution, otherwise known as EPMC, and for the non-sworn member/employee to offset the cost by contributing an additional 9% towards the employer costs/rate as established by CalPERS and for a sworn (safety) member/employee to cost share an additional 12% towards the employer costs/rate.
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BACKGROUND:
As Council is aware, for the past several years, the City has endured some of the most horrific financial challenges in its history. To manage the challenges, since 2009, City employees have had numerous salary and benefit reductions, averaging in the vicinity of a 20% reduction along with a 25% reduction in City wide staffing. It has been Council's desire and intent as the City's finances stabilize, the economy starts to improve and as existing labor agreements expire, to negotiate successor agreements providing for restoration of some, not all, of the concessions made by employee groups.
DISCUSSION:
For over 20 years, a benefit provided to certain labor groups was that of the City paying the employee's (Member) CalPERS contribution and reporting such contribution as earnings. During the time of fiscal emergency, the employees gave up this benefit and contributed their own member contribution. During contract negotiations with Police Management last summer and fall, much discussion took place about the restoration of this benefit at a cost to the employee, not a cost to the City. This resulted in a commitment by the City to investigate this possibility with CalPERS. After discussions with CalPERS, it has been determined that this is possible and available to CalPERS "Classic" members, on a pre-tax basis to the employee. CalPERS has completed contract amendments with other member organizations that accomplish the same by agreeing to a cost sharing arrangement with the employee ("member"). This is accomplished by the following: the City will agree to pay and report 7% member contribution for CalPERS "classic" members of the Non-Represented ("NonRep") employee group and CalPERS "classic" members of CCPMA and in exchange, the members of each group will increase their employee member contribution by 9% for NonRep and 12% for CCPMA.
Currently, to report a 7% member contribution as earnings, the City would have to pay the cost of 19% of the 7% or 1.33% for NonRep and 33% of the 7% or 2.31% for CCPMA. In order for this benefit to be restored, the members of each group must be willing to absorb the City's cost and a premium to the City's cost to mitigate, as can best be estimated, future CalPERS costs in their retirement. The cost for NonRep would be 7%+1.33% (city cost if city had to pay this) + a premium of .67% for a total of 9% cost to the member. The cost for a CCPMA would be 9% (current member contribution) + 2.31% (City cost if City had to pay this) + a premium of .69% for a total cost to the member of 12%.
This is a benefit the members gave up and the City committed to restore if there was little to no cost to the City. The members impacted are those employees designated as CalPERS "Classic" members. In Cathedral City's case, the majority of these employees were hired before 1/1/2013. Only 2 employees, considered "classic", have been hired since 1/1/2013. The total number of employees affected for each of these groups is 26 for NonRep and 14 for CCPMA. It is estimated the affected employees will be retired in the next 5 to 20 years.
The attached resolution identifies the Non-Represented Group only as this group does not have a bilateral agreement with the City. Once CalPERS receives an approved resolution increasing the member contributions for the NonRep group and a copy of the Memorandum of Understanding and supporting documents with CCPMA, another formalized process will be completed to amend the City's contract with CalPERS. This process will be brought back to City Council during the March/April/May time period as the process requires multiple actions of the City Council.
FISCAL IMPACT:
Although the members of each group are paying the City's cost and a premium, essentially reducing today's CalPERS cost to the City, the future rates imposed on the City by CalPERS can vary strictly due to CalPERS investing strategies and resulting asset valuations. The employees are covering 100% of today's costs while mitigating the impact of potential future costs to the city.
ATTACHMENTS:
Resolution