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THE CITY OF 2 . .._ , , CITY COUNCIL AGENDA REPORT L pLEASANTON. October 16, 2012 Administrative Services TITLE: ADOPT A RESOLUTION OF INTENTION AND INTRODUCTION OF ORDINANCE TO AMEND THE CONTRACT BETWEEN THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND THE CITY OF PLEASANTON TO INCLUDE SECTION 20475 (DIFFERENT LEVEL OF BENEFITS), SECTION 21363.1 (3% @ 55 FULL FORMULA) AND SECTION 20037 (THREE-YEAR FINAL COMPENSATION) PROVIDING A DIFFERENT TIER OF RETIREMENT BENEFITS FOR NEW EMPLOYEES COVERED BY INTERNATIONAL ASSOCIATION OF FIREFIGHTERS LOCAL 1974 SUMMARY The statewide pension reform bill takes effect on January 1, 2013 and provides a less generous benefit than the current formula (3%@50/one-year final compensation) offered by the Livermore-Pleasanton Fire Department (LPFD) to its fire personnel. However, the pension reform bill only applies to members new to the California Public Employees' Retirement System (CaIPERS) after January 1, 2013 (New Employees) and not to employees who are already a member of the system prior to January 1, 2013 (Lateral Employees). By adopting the newly negotiated 3%@55/three-year final compensation retirement formula, the LPFD will be able to offer newly hired Lateral Employees moving from other CaIPERS agencies the less expensive 3%@55 retirement program instead of the current 3%@50 retirement program. CaIPERS requires that the City initiate the process to implement this 3%I @55/three-year compensation program by disclosing the new employer rate and adopting a Resolution of Intention and Introduction of an ordinance to amend contract. RECOMMENDATION Adopt the resolution of intention (Attachment 1) and introduce an ordinance (Attachment 2) to amend the contract between CaIPERS and the City of Pleasanton to implement the new tier of retirement program for newly hired lateral candidates of the LPFD. FINANCIAL STATEMENT According to the CaIPERS actuary, there will be no immediate employer contribution rate impact from this amendment. Instead, the employer normal cost will gradually decrease as the ratio of new "second tier" employees increases, and as those changes are reflected in CaIPERS actuarial valuations (a three-year lag). The CaIPERS actuary has estimated that the full decrease in the employer rate would be 2.9% assuming no change in employee demographic characteristics.