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BACKGROUND Section 11332 of the Omnibus Budget Reconciliation ACT of 1990 "OBRA '90 extends retirement benefit coverage to employees not covered by a retirement plan such as CaIPERS. This group of employees comprised primarily of part-time and temporary individuals pay into Social Security. However, options for an alternative retirement plan to Social Security exist and City staff recently examined the feasibility of implementing such a program. These plans provide certain advantages to both the City and the covered employees and are described in further detail below. DISCUSSION Comparison between Social Security and APPLE programs: Social Security requires a contribution of 12.4 of which 6.2% is paid by the Employer, and 6.2% is paid by the Employee. Under APPLE a 7.5% payroll contribution is required and the contribution may be a combination of Employee /Employer paid. The employees currently contribute 6.2% to Social Security, staff recommends that they continue to contribute 6.2% towards the APPLE program and the City will contribute the remaining 1.3% to the fund. Based on a workforce of 394 part-time employees and a total annual payroll of approximately $1.6 million, the savings estimate for the City of Pleasanton is $80,000 in the first year. Assuming very modest annual adjustment in total payroll over a 10 -year period, savings estimates are $395,000 by the fifth year and $800,000 after 10 years. With the Social Security program, employees are eligible for retirement benefits only after they have paid into the system for 40 quarters, or 10 years. Under the APPLE program, benefits to employees include immediate vesting of the funds contributed to their accounts (an IRC 457 account) by both themselves and the City, portability of assets which may be transferred to other retirement programs upon separation, ability to withdraw funds due to unforeseen circumstances with no early withdrawal penalty and a modest increase in net pay as the funds are treated as pre -taxed contributions. The IRC 457 plan is subject to IRC 414(h)(2), a tax qualified plan which allows the City to treat the employee's contribution to the plan as if paid by the City and not included in gross wages until distribution. APPLE is a group annuity program funded through American United Life Insurance. The plan guarantees a 3% rate of return until December 2011. The rates are driven by life time annuity rates which have historically been steady. Employer costs are 2% of total funds contributed the first year of the program and 0.8% of total funds contributed each year thereafter. Estimated costs are $2415 in the first year and $1932 in the second year. Eligible employees: Part-time and temporary employees not covered by CaIPERS are eligible for the APPLE program. The majority of the City's temporary employees are hired for a short period of time to provide services in the recreational and parks maintenance areas. Many do not return on a regular basis to work for the City. Informational meetings will be conducted to educate current employees on critical elements of the program. The City will allow any current employee who elects to remain in the Social Security program to do so (for Page 2of3