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City of Pasadena Pension Reform

City of Pasadena Pension Reform. City Council Discussion May 23, 2011. Retirement Systems. Timeline of Employer CalPERS Rates Projected CalPERS Cost *FY11 & FY14 Rates are estimated from current payroll. Retirement Systems.

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City of Pasadena Pension Reform

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  1. City of PasadenaPension Reform City Council Discussion May 23, 2011

  2. Retirement Systems • Timeline of Employer CalPERS Rates • Projected CalPERS Cost *FY11 & FY14 Rates are estimated from current payroll

  3. 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

  4. 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 Miscellaneous • 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

  5. 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 • 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

  6. 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 • 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

  7. 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%

  8. Pension Alternatives

  9. 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 Reform Options

  10. 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

  11. Reform Options • Modify Employee Contributions • Current Contributions * Some units have agreed to full pickup

  12. 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.

  13. 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)

  14. 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);

  15. 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;

  16. 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.

  17. 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

  18. 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

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