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HomeMy WebLinkAbout8.2 Review Emp Retirement Contract Options CITY OF DUBLIN '1,2-o nn l� AGENDA STATEMENT CITY COUNCIL MEETING DATE: August 26, 1985 SUBJECT Review of Public Employees' Retirement System Contract Options EXHIBITS ATTACHED No nt RECOMMENDATION Receive report and direct Staff as appropriate FINANCIAL STATEMENT: See Discussion DESCRIPTION At the regular City Council meeting on August 12 , 1985 , Staff was directed to prepare a review of the current Public Employees ' Retirement System ( PERS ) contract options . At the regular City Council meeting on August 9, 1982 , the City Council discussed the contract options under the retirement program. Among the options was the inclusion or exclusion of elected officials . It was determined at that time to exclude elected officials from the PERS program. Currently, full time City employees are covered by this program. It provides for retirement benefits calculated at 2% of the final compensation for each year of service at a retirement age of 60. (For example , a person who has 5 years of service and has reached age 60 would receive a benefit of 10% of his salary) . The employee contributes 7% of their gross wages , exclusive of any overtime earnings . The City must contribute at a rate , which is adjusted on an annual basis . The rate is adjusted pursuant to actuarial studies based on the composition of the City ' s work force . The City ' s contribution rate for 1985-86 is 7.878%. Under the PERS program, if the City Council requested removal of the exclusion for elective officers , PERS would require a valuation. The cost of this study would be $151 . If the elective officials are not specifically excluded from the membership by contract , each official would have the option to elect coverage under the system. The State Government Code provides that the elective officials exclusion includes members of the . City Council and the City Attorney. Staff has contacted the PERS Membership Division and they have indicated that 3 options would exist for removal of the exclusion. The options are as follows : 1 ) The exclusion could be removed with the right to participate open to all prior and current elective officials . 2 ) The removal can be made to apply only to those holding office at the time that the contract is amended and they may be credited for prior service. 3 ) The exclusion may be removed for those holding office at the time that the contract is amended, and no credit is given for prior service . If the exclusion was removed , elected officials who chose to participate in the program would incur a deduction from their salary of 7%. In addition, the City would contribute 7 .878% of the Councilmembers ' salary. Based on the current City Council salary of $165 , and assuming 5 elected officials participated , the cost to the City would be approximately $780 per year. ---------------------------------------------------------------------------- COPIES TO : ITEM NO. 8 , 2— AGENDA STATEMENT: Review of PERS Contract Options Page 2 As noted above , the removal of the exclusion would also be applicable to the City Attorney. State Law includes the office of City Attorney as an elective office without regard to it ' s elective status .- Therefore , the City Attorney would also have the option of participating in the PERS program. The exact amount contributed by the City would be dependent on the amount of professional legal expenses . Staff has also evaluated the contract option for a member to have up to 4 years of military service credited as public service . This option is not a part of the City ' s current contract . If this option were selected , it is estimated that the City' s contribution rate would increase by a minimum of 1% to a total of 8 .878/ of the City' s payroll . Based on the most recent pay period including 9 full time employees , the cost to the City per year would be a minimum of $2 , 500. This cost would increase once the City filled the positions which are currently vacant . When this option is provided , it then becomes applicable for all of the current employees of the agency as well as future employees . This contract option also requires that the employee contribute a lump sum payment equal to both the employer' s and the employee ' s contribution rate . This payment is calculated on the member' s compensation at the first period of service with the City following their military service . The City of Dublin currently provides health insurance to full time employees through the PERS Public Employees Medical and Hospital Care Act . The health benefits contract requires that all PERS Retirement Program members and annuitants must be offered coverage . If the City Council elected to remove the exclusion for elective officers , any individuals who selected retirement coverage would then also become eligible to participate in the health insurance program. The City currently provides a maximum City contribution of $224 plus the administrative costs charged by PERS . The program requires that the City contribute equally towards both current members and annuitants . This requirement establishes an obligation for the City while participating in the program, to contribute $224 per month to retired employees who have retired under the PERS program from the City of Dublin. In order to retire under PERS , an individual must be 60 years old and have service credit equal to 5 years . The City selected to enter into this program due to the options it afforded a City with a small Staff. A small group attempting to acquire health insurance is difficult . Staff has continued to evaluate options to obtain insurance independent of this program, however, due to the small size of the group and the current composition, it is most advantageous to pool resources under the PERS health insurance program. It is estimated that the City would incur an additional annual cost of $13 ,800 if each of the Councilmembers elected to particpate in the health insurance program. This estimate includes administrative charges and assumes the use of the maximum City contribution. Again, the City Attorney would also be eligible for this program provided that the elected official inclusion was removed from the PERS agreement . City Staff will be available to answer any questions regarding the retirement program. If the City Council desires to pursue any additional options to the contract , it would be appropriate to direct Staff to request a valuation of the City ' s retirement program.