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City Council Discussion

May 23, 2011

City of PasadenaPension Reform

Human Resources Department

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Retirement Systems

• Timeline of Employer CalPERS Rates

• Projected CalPERS Cost

*FY11 & FY14 Rates are estimated from current payroll

FY09 FY10 FY11 FY12 FY13 FY14

MISCELLANEOUS PLAN 10.644% 10.855% 11.422% 15.484% 16.300% 19.000%

SAFETY PLAN 21.898% 22.977% 23.599% 26.559% 27.200% 30.200%

  FY11 FY14

MISCELLANEOUS PLAN $12.3 M $13.2 M

SAFETY PLAN $9.6 M $10.3 M

Human Resources Department

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Retirement Systems

• Currently the City participates in the CalPERS retirement plans> Miscellaneous Plan

2.5% @ 55

> Fire & Police Safety Plan 3% @ 55

• Both retirement plans are currently two tier

• Eligible part-time & temporary employees participate in separate plan of PARS Retirement

Human Resources Department

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Miscellaneous

• Misc. Tier 1 Plan

> Employees hired on or before July 1, 1984

> 115 Active Employees

> 2.5% @ 55

> One (1) year final calculation

> 2% COLA

• Misc. Tier 2 Plan

> Employees hired on or after July 2, 1984

> 1333 Active Employees

> 2.5% @ 55

> Three (3) year final calculation

> 2% COLA

Human Resources Department

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Fire

• Fire Tier 1 Plan

> Employees hired on or before April 29, 1984

> 21 Active Employees

> 3% @ 55

> One (1) year final calculation

> Post-Retirement Survivor

> 2% COLA

> FPRS System Transfer

• Fire Tier 2 Plan

> Employees hired on or after April 30, 1984

> 145 Active Employees

> 3% @ 55

> One (1) year final calculation

> Post-Retirement Survivor

> 2% COLA

Human Resources Department

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Police

• Police Tier 1 Plan

> Employees hired on or before May 15, 1983

> 11 Active Employees

> 3% @ 55

> One (1) year final calculation

> Post-Retirement Survivor

> 2% COLA

> FPRS System Transfer

• Police Tier 2 Plan

> Employees hired on or after May 16, 1983

> 222 Active Employees

> 3% @ 55

> One (1) year final calculation

> Post-Retirement Survivor

> 2% COLA

Human Resources Department

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PARS Retirement

• Part-time and Temporary Retirement Plan provided by PARS> Omnibus Budget Reconciliation Act of 1990

(OBRA 90) mandated employees of public agencies who are not members of the employer’s existing plan be covered under an alternative plan.

> 401(a) Type Plan

• 7.5% Shared Contribution> City contributes 4.0%

> Employee contributes 3.5%

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Pension Alternatives

Human Resources Department

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Reform Options

• Add a third tier to the Retirement Plan> Miscellaneous Plans

2% @ 60 2% @ 55 2.5% @ 55 2.7% @ 55 3% @ 60

***(Only Plans offered by CalPERS)

•Reduce/Change Tier Options > i.e. Final Year Calculation, Military Buyback, Sick Leave

Credit, Pre-Retirement Optional Settlement Death Benefit, Post-Retirement Survivor Allowance, Death Benefit Continues, 59 Survivor Benefit Level 4, Prior Service Credit

> Safety Plans 2% @ 55 2% @ 50 2.5% @ 55 3% @ 55 3% @ 50

Human Resources Department

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Reform Options

• Reduced plan with PARS Supplement• Reduce/Change Employee Contributions

paid by the City• Have employees pick up portion of City’s

PERS costs• Delay or Eliminate EPMC (PERS on PERS)• Revise all plans to 3 year final

compensation calculation• Restrict calculation of employees’

retirement benefit to base pay only; eliminate add-ons of specialty pays or leave banks

• Eliminate Retiree Medical Options

Human Resources Department

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Reform Options

• Modify Employee Contributions > Current Contributions

RETIREMENT PLAN

GROUPEMPLOYEE

CONTRIBUTIONCITY

CONTRIBUTIONTOTAL

CONTRIBUTION

         

CalPERS Fire & Police Safety 0.0% 9.0% 9.0%

CalPERS Executive & Non-Rep Mgmt 3.6% 4.4% 8.0%

CalPERS All Other Units * 4.6% 3.4% 8.0%

PARS Temporary & Seasonal 3.5% 4.0% 7.5%

* Some units have agreed to full pickup

Human Resources Department

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Reform Options

• Consider the “Time-in-Grade” exception which delays the EPMC payment for all newly hired employees up to five years.> The city would need to pass a

resolution and adjust its current contract with CalPERS.

Human Resources Department

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Reform Options

• Eliminate EPMC• EPMC (PERS on PERS) is defined

as reporting the Employee Paid Member Contribution as Compensation Earned.> Example

$50,000 – Employee earnings + 8% - EPMC $54,000 – Employee is reported as

earning Note: City pays full employer and

employee PERS share of the $4,000 (which is PERS on PERS)

Human Resources Department

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Reform Options

• Actions Proposed at State Level> Base final retirement salary on three

highest paid years worked;

> Calculate benefits only on base salary eliminating all “spiking;

> Eliminate the purchase of “air time”;

> Eliminate the availability of Employer Paid Member Contribution (EPMC);

Human Resources Department

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Reform Options

> Require employees to pay the employees share of PERS;

> Remove caps on the percentage employees can pay for the total cost of PERS programs;

> Prohibit employees and employers from taking contribution “holidays”;

> Change PERS vesting period to seven years;

Human Resources Department

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Reform Options

> Have PERS provide a hybrid pension system option that caps the Defined Benefit PERS pension and supplement with a risk managed PERS defined contribution plan;

> Have PERS provide more formula choices with lower benefit local options.

Human Resources Department

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Reform Options

• Eliminate Retiree Medical (Non-Safety)> Current Agreement

Provide 850K annually All units must share cost Currently in negotiations with the

Retiree Medical Coalition

Some bargaining units have agreed to opt out

Human Resources Department

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Next Steps

• Negotiate with miscellaneous employees’ Retirement Coalition regarding:> New retirement tier plan;

> Employer Paid Member Contribution (EPMC)

• Negotiate with miscellaneous employee bargaining groups for greater share of PERS contributions