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BACKGROUND The Memorandum of Understanding (MOU) between the City of Pleasanton and the Pleasanton Police Officers' Association (PPOA) expired June 1, 2011. Representatives from the Union and the City met and conferred in good faith to develop a successor contract. One element of the contract is the establishment of a different California Public Employees' Retirement System (CaIPERS) benefit for new hires. Current employees covered under the Police Officers' Association Memorandum of Understanding participate in a CaIPERS risk sharing pool for agencies with less than 100 active members, and have the 3% @ 50 retirement formula with a one-year final compensation calculation. This second tier for new hires provides for the 3% @ 55 formula with an average of three-year compensation calculation. DISCUSSION Adoption of the new tier retirement program will result in substantial savings over the long term for the City once all employees are on the less costly retirement program. As previously shared, the cost savings to the City for this item are reflected in Attachment 1 (prepared by the City's actuary, John Bartel). Meanwhile, the 3% @ 55 program still allows the Police Department to remain competitive in attracting and retaining high quality candidates. CaIPERS requires that agencies disclose the rate identified in the amendment actuarial valuation (Attachment 2) for the adoption of this plan amendment as follows: The employer contribution rate will be 20.057% of reportable earnings for local police members entering membership for the first time in the police classification after the effective date of this amendment to contract. Because the City's sworn police personnel is less than 100, the City is required to participate in a CaIPERS risk pool. To determine the annual dollar savings, the Risk Pool's Employer Normal Cost plus the surcharge for the one-year compensation benefit are compared for the existing plan (3%@50) to the new program (3%@55). This results in a difference of approximately 2.7% as illustrated below. The savings is calculated by multiplying the fiscal year payroll for the new employees by 2.746%. To implement this change, CaIPERS requires that the City adopt a Resolution of Intention to amend the contract to provide Section 20475 (Different Level of Benefits), Section 21363.1 (3% @ 55 Full Formula) and Section 20037 (Three-Year Final Compensation). In addition, an ordinance to that effect must also be adopted. Both the resolution of intention and introduction of the ordinance may take place at the same City Council meeting. Pursuant to Government Code Section 20471, there must be a 20 day waiting period between the adoption of the Resolution of Intention and the adoption of the final ordinance. Therefore, the final ordinance will be presented at the June 5, 2012 City Council meeting. The proposed amended contract is attached as Attachment 3. Following the required process, the effective date of the amendment is July 7, 2012 and new police personnel hired after this date will be provided the 3% @ 55 formula with an average of three-year compensation calculation. Page 2 of 3