HomeMy WebLinkAboutCC Resolution 13344 (Support Pension Reform Efforts)RESOLUTION NO. 13344
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL IN SUPPORT OF
PENSION REFORM EFFORTS
WHEREAS, local government retirement benefits (such as pensions and retiree health)
have been at the forefront of public debate across the nation; and
WHEREAS, addressing long-term retirement liabilities is a primary concern to local
agencies across the State; and
WHEREAS, there are a number of legal parameters that exist that frame the discussion
of pension reform including, but not limited to, federal and state retirement law, contract clauses
of the federal and state constitutions, court decisions, and labor law; and
WHEREAS, the extraordinary investment losses brought on by the Great Recession
have increased the contributions required by employers to fully fund pension systems including
the California Public Employees' Retirement System (CaIPERS) and the Marin County
Employees' Retirement Association (MCERA); and
WHEREAS, the City of San Rafael's annual pension costs have been increasing and the
City has taken numerous steps to control pension costs over the short and long terms, including
actions such as:
• beginning in 2002, employees paid an increasing amount and now pay the maximum
amount allowed towards their pensions (on average, San Rafael employees pay
11.5% of their salary towards their pension),
• as San Rafael does not pay any of the employees' contribution, there are no
compensable earnings related to employer paid contributions,
• new, lower benefit pension tiers were created for all new safety and non -safety
employees in 2011,
• the pension formula for new non -safety employees was reduced in 2011 from "2.75%
@ 55" to "2% @ 55,"
• pensions for all new employees (after 7/1/11) are based off of an average of three
years of earnings (the longest currently allowed under the law) rather than a single
year, which is a provision that limits "pension spiking,"
• annual adjustments to pension benefits for all new employees (after 7/1/11) were
lowered to "up to 2%" from "up to 3%." In addition, all employees are required to pay
50% of the normal cost for any such adjustments,
• starting 7/1/11, all employees agreed to a two year labor agreement that included a
four percent reduction in compensation, which lowered the City's required pension
contribution,
• the City, in 2009, designed and offered an early retirement program that, unlike the
"Golden Handshake" used in many jurisdictions, did not improve employee pension
benefits and did not add to the City's unfunded liability,
• regarding retiree healthcare, the retiree health benefit for all new hires (starting in
2009) was reduced to the minimum allowed under the law,
• San Rafael Councilmembers and staff participated in the 2010-11 Marin County
Council of Mayors and Councilmembers (MCCMC) Pension and Other Post
Employment Benefits (OPEB) reform process,
• San Rafael played a lead role in the 2009 pension reform policy paper of the Marin
Managers' Association,
• the City Council, in 2012, created a Pension and OPEB Subcommittee which has
subsequently met several times to review pension reform actions to date and
consider additional steps to reduce the City's cost of post employment benefits; and
WHEREAS, the City Council believes the City needs to further examine pension options.
Under current law, there are limited options available which include: 1) for non -safety
employees, two lower benefit formulas (2% at 58.5 and 2% at 61.25) and, 2) for safety
employees, there is one lower benefit formula available (2% at 50). These options for non -
safety and safety employees could be examined with a Defined Contribution component to
create a hybrid plan; and
WHEREAS, the City Council believes the City must carefully consider additional options
as they are made available by legislative change to control pension costs in the short and long
term, while not negatively impacting its ability to attract and retain high performing employees;
and
WHEREAS, the City Council believes it would be appropriate to create and adopt a set
of guiding principles for the City with respect to its retirement benefits.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of San Rafael
does hereby confirm, acknowledge, and agree to abide by the following guiding principles and
practices:
1. Emplovee Relations: Employees are the City's most valuable resource and should be
fairly compensated for the work that they perform on behalf of the citizens of San Rafael.
The City Council has a responsibility to ensure that employees are adequately
compensated while at the same time being fiscally responsible regarding short and long
term budgets and financial realities.
2. Reserve Fundina: In 2010, the City created a separate "Retirement System Fund" in an
attempt to set aside funds to mitigate the effect of rising pension costs. The City has
been maintaining a similar fund for retiree healthcare costs. The City should seek to
augment these funds over time to assist in addressing unfunded post employment
liabilities.
3. Retiree Health: In 2009 and 2010, the City took actions to cap retiree medical benefits
due to increasing costs as shown in the Governmental Accounting Standards Board
Statement No. 45 (GASB 45) required actuarial reports. The City Council does not
intend to increase retiree health benefits other than those required by law or existing
resolutions.
4. Pension Cost Control: The Council will continue to seek pension cost controls under the
current framework of the law, such as further reductions to benefit tiers, and also
supports Statewide measures such as those shown below.
NOW, THEREFORE, BE IT FURTHER RESOLVED that the City Council of the City of
San Rafael supports Statewide legislative changes in the following areas:
5. Benefit formulas: There are currently an inadequate number of legally available options
for pension benefit formulas both in terms of benefit percentage and retirement age.
Statewide legislative changes should occur that would allow additional alternatives
including "hybrid" plan options, such as defined contribution (including cash balance
plans) and defined benefit plans which would address benefit levels, minimum retirement
ages, and benefit caps.
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6. Pension Tier Elements: Greater flexibility is needed in setting pension tier elements
such as the number of years that a pension is based on, COLAs, etc.
7. Emplovee Contributions: Greater flexibility is needed regarding employee pension
contributions. For example, employees, by agreement, should be able to pay portions of
the employer cost.
8. Compensable Earnings: Greater flexibility is needed so that employers may include only
base pay as pension -eligible as a way of controlling pension costs and prevent "pension
spiking." Currently, many pay items have already been excluded as pension -eligible,
such as overtime or bonuses, but this principle supports a legislative change to include
only base pay.
9. Excess Pavments to Retirees ("Ad Hoc COLAs"): In addition to the retirement board
approval, consent of the local governing board (City Council) should be required before
any excess payment is made by a retirement system to a retiree, such as an ad-hoc
COLA.
10. Retroactive Benefit Adiustments: Unfunded retroactive pension increases should be
prohibited.
11. Pension Pavment Requirement: Pension payments should be regulated when the
system is over -funded, rather than simply declaring a pension "holiday." While MCERA
required pension payments even when the plan was over -funded, this principle seeks
further regulation to set aside additional funds in over -funded years.
12. Service Credit Purchases: The purchase of "air time" service credit for time not actually
worked under the retirement system should be prohibited. Currently, none of the
MCERA member agencies have adopted the "air time" provisions, but this principle
supports a legislative change to eliminate the practice altogether.
I, Esther C. Beirne, Clerk of the City of San Rafael, hereby certify that the foregoing
Resolution was duly and regularly introduced and ado�ted at a regular meeting of the City
Council of the City of San Rafael, held on Monday, the 7t of May 2012, by the following vote, to
wit:
AYES: Councilmembers: Connolly, Heller, Levine, McCullough & Mayor Phillips
NOES: Councilmembers: None
ABSENT: Councilmembers: None
Esther C. Beirne, City Clerk