HomeMy WebLinkAbout08-10-1999 Agenda Item 7SARATOGA CITY COUNCIL
EXECUTIVE SUMMARY NO. ~ ~ ~~ AGENDA ITEP
MEETING DATE: August 10,1999 CITY MANAG
ORIGINATING DEPT: Administrative Services DEPT. HEAD:
SUBJECT: Public Employees' Retirement System (PERS) Contract Amendment to
Provide the 2% at age 55 Retirement System Option
RECOMMENDED MOTION(S):
1. Move to adopt Ordinance authorizing amendment to the contract between the City and PERS
2. Direct staff to return the appropriate documentation to PERS, and to implement the contract
amendment.
REPORT SUMMARY:
The recent negotiations between the City of Saratoga and the Saratoga Employees' Association
(SEA) culminated in the Memorandum of Understanding (MOU) which was approved by the
City Council on July 13, 1999. Pursuant to the MOU, the City agreed to change the PERS
retirement formula to the 2% at age 55 option. This option allows employees to receive a
pension at the age of 55 in the amount of 2% for every year of service in the PERS retirement
plan.
To implement the change, PERS requires the City to adopt a Resolution of Intention to amend
the contract and an Ordinance formally amending the contract. On July 21, the Resolution of
Intention was approved by the City Council, and the first reading of the Ordinance was held.
PERS requires twenty days to pass before the second reading of the Ordinance, so the earliest
that the Ordinance could be adopted is August 10. If adopted, the Ordinance will take effect in
thirty days on September 10, and the new retirement option will be implemented the first day of
the next pay cycle, September 18, 1999.
FISCAL IMPACTS:
PERS provided the City with an actuarial analysis of the cost of adopting this retirement plan
amendment. The actuarial analysis is highly technical, but is required to be provided to the
public. The change in the present value of the City's benefits as a result of this amendment is
$1,225,689, and the change in the unfunded accrued liability is $821,077. However, since the
City has more than this amount in the PERS account (primarily due to very positive returns by
PERS on their investments on a statewide basis) there is no increase in the amount which the
City will be required to pay PERS for a number of years (currently estimated at 13 years).
In other words, there is no increase in the PERS rate associated with providing this retirement
benefit on a short-term basis. In the long term, however, PERS rates will most certainly increase.
To provide for these costs in years to come, a separate Retirement Reserve Fund will be opened
on the City's books, and an amount will be transferred into the fund each year in an amount
sufficient to provide this benefit to all employees. As the excess in PERS is used up over the
years, there will be sufficient monies in this City special retirement fund to finance the program
over the next 35 years. Staff estimates the amount which will need to be transferred into this
retirement fund to be about $34,900 annually for all City employees.
ADVERTISING, NOTICING AND PUBLIC CONTACT:
Nothing additional.
CONSEQUENCES OF NOT ACTING ON RECOMMENDED MOTION(S):
The City would not be in compliance with the MOU between the City of Saratoga and the SEA
which was approved on July 13, 1999.
FOLLOW UP ACTIONS:
Direct staff to return the appropriate documentation to PERS, and to implement the contract
amendment.
ATTACHMENTS:
Ordinance Authorizing Amendment to the Contract between the City and PERS
August 4, 1999
2@55
2
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SARATOGA
AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN
THE CITY COUNCIL OF THE CITY OF SARATOGA AND
THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM
The City Council of the City of Saratoga does ordain as follows:
SECTION 1. That an amendment to the contract between the City Council of the City of
Saratoga and the Board of Administration, California Public Employees' Retirement System is
hereby authorized, a copy of said amendment being attached hereto, marked Exhibit, and by such
reference made a part hereof as though herein set out in full.
SECTION 2. The Mayor of the City Council of the City of Saratoga is hereby
authorized, empowered, and directed to execute said amendment for and on behalf of said
Agency.
SECTION 3. This Ordinance shall take effect thirty days after the date of its adoption,
and prior to the expiration of fifteen days from the passage thereof shall be published a summary
of this Ordinance at least once in the Saratoga News, a newspaper of general circulation,
published and circulated in the City of Saratoga and thenceforth and thereafter the same shall be
in full force and effect.
Adopted and approved this day of , 1999, by the following vote:
AYES:
NOES:
ABSENT:
ATTEST:
Mayor
City Clerk